ORAL ANSWERS TO QUESTIONS

WORK AND PENSIONS

The Secretary of State was asked—

Single-tier State Pension

George Hollingbery: When he plans to bring forward his proposals for a single-tier state pension.

Steve Webb: With permission, Mr Speaker, I will answer this question together with Questions 6 and 20.
	I can confirm that, as was announced by the Chancellor in his Budget, we will present further details about the single-tier state pension in a White Paper later in the spring. Final decisions on the detailed implementation of the policy will be made in the next spending review.

George Hollingbery: A number of my constituents have contacted me expressing concern about the transition between the old and new systems—in particular, a Mr Theo Stellakis, whose questions the Minister has answered on a number of occasions. Can the Minister tell us how the transition will affect two people, one reaching the age of 65—or reaching pensionable age—on the day before the changes are implemented, and the other doing so the day after?

Steve Webb: I recall corresponding with Mr Stellakis on a number of occasions. What concerns him is the idea of a cliff edge before and after 2016. Let me clarify the position. When people receive state pensions of less than the full amount because they were contracted out, as I believe the hon. Gentleman’s constituent was, we will continue to take account of that after 2016, so there will not be the cliff edge that he envisages. We will have to phase out the arrangement over time, but in 2016 we will continue to take account of past contracting out.

Mr Speaker: Mr Simon Hughes? Not here. Jo Swinson? Not here.
	The Department kindly informed me of the intended grouping at approximately 9.10 this morning. I hope, and say with some confidence that I trust, that it also informed the hon. Members in question. Neither of them is present, however, so I call Mr Julian Brazier.

Julian Brazier: Does my hon. Friend agree that the great advantage of his proposal is that it will help to restore incentives to save? Many people feel today that there are few such incentives in the benefits system.

Steve Webb: My hon. Friend is right. At present, the level of the basic state pension is so far below that of the means test that the first slice of savings is largely offset by means-tested benefits. My right hon. Friend the Chancellor has confirmed that whatever detailed proposition we present, the level of the single-tier pension will be clear of basic means-testing, and will therefore reward those who have saved rather than penalising them.

Frank Field: How long does the Minister think he will get away with these proposals? If a private company decided to do what he proposes to do—take contributions away from people who have paid over the years and give additional pensions to people who have not paid anything—the House would be jumping around with anger. Why does he think he can do that to people who have paid for a second state pension?

Steve Webb: If we were doing what the right hon. Gentleman says we are doing, I should be as outraged as he is. However, we are not doing that. Part of our proposition is that all contributions paid to date will be recognised in the new system. At the point of transition, if someone was heading for a pension of £150, £160 or £170 a week, that is what we would pay that person. [Interruption.] The right hon. Gentleman asks, from a sedentary position, where the money is coming from. We will present our costings in the White Paper, and he will see then that we will find it through less means-testing, among other things.
	As for bringing people into the system, successive Governments have, for example, credited women who have spent a period at home with children. Although they have not paid cash, they have contributed, and that should be recognised. I think that that is right, and we are doing the same.

Gregg McClymont: In his Budget statement, the Chancellor told the House that moving to a single state pension would not cost more in any year than the current pension system. Further to the question from my right hon. Friend the Member for Birkenhead (Mr Field), may I ask whether the costs of the move will be borne partly by the more than 7 million workers in the private and public sectors who contribute to defined-benefit schemes and are currently contracted out?

Steve Webb: As the hon. Gentleman knows, when we introduce a single state pension there will be no more contracting out, so clearly those who were in contracted-out schemes will be contracted back in. However, the annually managed expenditure costs of the scheme are being met by the reduction in means-testing and paying of savings credit to new claimants only, and by an increase in de minimis provision, so that people who have spent only a few years in the country do not build up a state pension as they would currently do. Those are the two main
	ways of meeting the costs, but they will also be met through the non-accrual of additional second state pensions after 2016.

Childcare Support

Julie Elliott: What assessment he has made of the effect of changes in funding for childcare support on unemployment among women.

Maria Miller: I refer the hon. Lady so the answer that I gave the right hon. Member for East Ham (Stephen Timms) last Thursday. In case she was not able to read Hansard, however, I can tell her that the Government fully recognise the importance of child care in helping parents—not just mothers—to move into or stay in work. Through universal credit, we will for the first time extend help with child care costs to those who work for less than 16 hours a week, which will benefit 80,000 families who formerly had no entitlement to such support.

Julie Elliott: Is the Minister aware that since the cut in the child care element of benefit in October 2011, 44,000 people have stopped claiming? How many of those people does she think have simply left work because it does not pay to work any more?

Maria Miller: I think the hon. Lady is referring to some statistics about the reason why individuals are not in work, but I do not think she can quite draw the conclusion she has drawn that those particular individuals are out of work. As she will know, the Government are absolutely committed to making sure more women are able to move into work, which is perhaps why there are some 61,000 more women in work now than when Labour left office.

Helen Grant: Does the Minister agree that flexible working and shared parental leave will be very helpful in keeping women in work and child care costs down?

Maria Miller: My hon. Friend is right. We have put in place a package of measures, including flexible working, that will make all the difference. I should also remind her that we have doubled the number of two-year-olds getting free nursery care, and some 80,000 more families will be able to get child care support under universal credit.

Remploy

Mel Stride: What progress he has made on support packages for Remploy workers in stage one factories.

Maria Miller: We will have a full and intensive package of support available for any employee affected by the Government’s announcement to accept the Sayce review recommendations. Remploy is currently within its 90-day consultation period, and once that has ended we will provide final and detailed information about the support disabled people will be given to move into mainstream employment.

Mel Stride: Like my hon. Friend, I believe it is far better for disabled people to have the opportunity to work in mainstream employment than in segregated factories. However, will she outline the reforms she is making to the access to work programme to make sure that, in this case, some of the most vulnerable people in our society are able to get back into work quickly?

Maria Miller: My hon. Friend is right to suggest that we feel that access to work is the measure that will, when expanded, do most to help disabled people into work, and we will be working with disabled people to ensure we get the measures right. We have already been able to announce an extra £15 million to support access to work over the spending period, thereby helping some 8,000 more disabled people into work.

Frank Roy: I have spoken to every single worker in the Wishaw Remploy factory, and all of them are in despair at the thought of losing their jobs. How many notes of interest have there been from potential bidders for the Wishaw factory?

Maria Miller: I thank the hon. Gentleman for that question. I am not privy to those sorts of commercial details, but I will be working as hard as I can—as, I am sure, will he—to ensure that there are more credible bids so that, if possible, factories such as the one in Wishaw, which supports some 20 disabled people, can continue. However, I also remind him that there are more than 11,000 disabled people in his constituency, and we are trying to ensure that the available money is helping all of them.

Lee Scott: Does my hon. Friend agree that it is very important to get young people with special needs into work, and does she welcome the scheme to be piloted in the borough of Redbridge in my constituency to get young people into work, and congratulate Interface and local businesses for playing their role in that?

Maria Miller: I commend the work my hon. Friend has been doing. He has done so much to support disabled people in his constituency get into work, and I look forward to continuing to follow the work he is doing.

Anne McGuire: Remploy Ltd provides a defined benefit occupational pension scheme for its employees, but it is not eligible for pension protection funding by virtue of regulation 2(1)(d) of the Pension Protection Fund (Entry Rules) Regulations 2005. In the case of Remploy, the Secretary of State for Work and Pensions guarantees that the company’s assets are sufficient to meet its liabilities in the event of its winding-up. Under the Minister’s current proposals, will the Secretary of State continue to honour that commitment to current and retired Remploy employees?

Maria Miller: I am sure the right hon. Lady is aware of the fact that when this Government took office we inherited an enormous deficit in the Remploy pension fund. We are trying to sort that out. I can absolutely give her the undertaking that pensions that are in place will be fully protected, as she would expect.

Youth Contract

Karl McCartney: What progress he has made on the youth contract; and if he will make a statement.

Stephen Metcalfe: What progress he has made on the youth contract; and if he will make a statement.

Chris Grayling: The youth contract was successfully launched on 2 April 2012. It builds on existing support available through Jobcentre Plus and the Work programme, enabling young people who are unemployed to look for work, gain work experience and skills, and find real, lasting jobs.

Karl McCartney: I thank the Minister for that illuminating answer. What assessment has been made of the impact of the work experience programme, which is being expanded under the youth contract?

Chris Grayling: We published the latest assessment of the effectiveness of the work experience scheme last week. It showed that the people who participated were 16% more likely to be off benefits 21 weeks after starting than a similar group who did not. It is worth stating that that is similar to the success rate of the future jobs fund, at a 20th of the cost.

Stephen Metcalfe: Can my right hon. Friend tell the House how the youth contract is being received by employers across the country?

Chris Grayling: We have had enormously gratifying levels of support from employers for the youth contract, in terms of their willingness both to hire and to give apprenticeships to young people. In particular, I wish to pay tribute to all the companies, large and small, around this country, including in your constituency, Mr Speaker, and that of my hon. Friend, that are providing work experience opportunities for young people. We know that such opportunities give them a much better start in life than those who do not have that experience.

Sheila Gilmore: Press reports have suggested that the amount of extra support being given to young people might be as little as a text message. Will the Minister be specific about how much face-to-face advice and support young people are getting under this programme?

Chris Grayling: Much more than was the case under the previous Government. We do not apply a one-size-fits-all approach; we do not drag somebody in from a work experience placement or from a sector-based work academy to do an interview with them. However, we keep in contact with everyone every week, and when people are not working—when they are not in a work experience placement—we are now providing weekly contact with young people, as opposed to the fortnightly contract that was the case under the previous Government.

Karen Bradley: One message coming from Staffordshire Moorlands Community and Voluntary Services, which runs the job club in Leek and Biddulph, in my constituency, is that it would like more employers to offer the youth contract. What can the Minister do to encourage more employers to get involved?

Chris Grayling: First, I pay tribute to the work being done in the Moorlands by the job clubs there, which is making a real difference to the prospects of the unemployed. What I say to my hon. Friend and to every hon. Member is that there is a real opportunity for each of us, individually, to approach local employers and encourage them to provide work experience opportunities. Tremendous work is already being done by colleagues in organising job fairs and organising different opportunities for young people who are looking for work. We can all play a part in this; it is a way in which this House can be a real activist centre in trying to help unemployed young people.

Stephen Timms: It is a good thing that the youth contract has finally started. The Deputy Prime Minister says that he told the Cabinet in January last year that something needed to be done on youth unemployment. Why has it taken the Department for Work and Pensions 15 months to make something happen?

Chris Grayling: I have great respect for the right hon. Gentleman, but on this occasion he has plain got it wrong. Over the past 12 months, we have put in place support through the work experience scheme, and we have put in place the Work programme and sector-based work academies. We have also given greater flexibility to job centres to use funding that is available to them to provide tailored support for people in their community. We have been working hard to tackle a problem of youth unemployment that built up and was left behind as a dreadful legacy by the previous Government.

Stephen Timms: In the youth contract, the wage subsidies are in a national pot to be handed out on a first-come, first-served basis, so providers will be competing to hand them out as fast as possible, whether or not they are actually needed. Surely it would have been far better to target subsidies where they are needed. Why has the youth contract been so badly designed?

Chris Grayling: Once again, the right hon. Gentleman has just got it plain wrong. We are targeting this support at young people who are struggling to get into work—the long-term unemployed. I am talking mostly about those who have been out of work for more than nine months, but sometimes this will go to those who have come from the most difficult backgrounds and who have been out of work for three months. This money is targeted absolutely at where it is needed, and I believe that it will make a difference.

Universal Credit

Elizabeth Truss: What assessment he has made of the means by which universal credit will deliver funding for childcare.

Iain Duncan Smith: We have committed to invest some £2.3 billion in child care support in universal credit—that is £2 billion spent on the current system and an extra £300 million we secured in order to extend support to parents working less than 16 hours. That should give them what is really important—support in work across the hours—and it means that some 80,000 more families will get child care under universal credit.

Elizabeth Truss: In the Netherlands there is a system of agencies that train and regulate childminders. That country has twice the number of childminders per head than we do in the UK and its child care is also more affordable. Will the Secretary of State look into what happens in the Netherlands, with a view to getting better value for the universal credit money and getting more people into work as childminders?

Iain Duncan Smith: I take this opportunity to congratulate my hon. Friend on the work that she has been doing on this. She is quite right that it is an important area and it is one that I have asked my Department and the Department for Education to consider together. Under the previous Government, the number of childminders fell quite dramatically. In 1996, there were about 100,000 and in 2011 that number had fallen below 60,000. That is a huge issue. When we took over, we found that the costs of child care in the UK are about the fourth highest in the world. My hon. Friend is absolutely right that there are big issues that we need to deal with and try to resolve so that we can more people back to work with the support that they need.

Löfstedt Report

Andrew Bridgen: What progress he has made on implementing the recommendations of the Löfstedt report on health and safety regulation.

David Ruffley: What progress he has made on implementing the recommendations of the Löfstedt report on health and safety regulation.

Chris Grayling: As my hon. Friends will recall, the Löfstedt review was published last November. We have already made good progress on implementing the report’s key recommendations. Consultation on the repeal or revocation of 21 legislative measures is already under way by the Health and Safety Executive and the Government intend to scrap, consolidate or improve 84% of health and safety regulations, greatly reducing the burdens on business and creating a clearer regulatory framework. In addition, two independent challenge panels have been established, the first to consider complaints from businesses about decisions made by HSE or local authority inspectors. The second will consider problems arising from non-regulators, such as insurance companies, health and safety consultants and employers, and to assess whether those decisions are proportionate and appropriate or whether they are wrong.

Mr Speaker: There is scope for a written ministerial statement, I would have thought.

Andrew Bridgen: It was one, Mr Speaker.
	I welcome the launch of the mythbusters challenge panel, designed to give quick advice to people affected by ridiculous or disproportionate health and safety decisions. Will my right hon. Friend explain how that panel will work?

Chris Grayling: What we are trying to do is to give people who believe that a decision that has been taken is wrong—such as a decision to cancel an event or to take some other step that will impact on their lives—a chance to go quickly the HSE and ask whether it is based on a true interpretation. We will seek to give them a clear view within two days of whether the decision is appropriate, so that they can challenge it locally.

David Ruffley: EU directives accounted for 94% of the cost of health and safety rules between 1998 and 2009. What discussions has the Minister had in Brussels about this completely unacceptable state of affairs and will he make it clear to Brussels officials that British businesses want less, not more, Brussels interference in the British workplace?

Chris Grayling: I wholeheartedly agree with my hon. Friend. The tide of bureaucracy we have seen in recent years has hindered business and affected employment. My view is that the EU should focus on measures that create jobs, rather than hindering the creation of jobs. That is of fundamental importance and I can assure him that I will fight that battle extremely vigorously in Brussels.

Tom Greatrex: The Health and Safety Executive has recently concluded its consultation on charging business for some of its services. Will it be able to keep the income brought in through that process or will it go straight into the Treasury?

Chris Grayling: The actual process is that all moneys raised in such a way go to the Treasury first, but financial agreement has been reached between the Treasury and the HSE, so that appropriate amounts of money are passed on to the HSE so that it can carry out that regime as intended.

Multiple Disadvantages

Stuart Andrew: What steps his Department is taking to support families and individuals facing multiple disadvantages.

Paul Maynard: What steps his Department is taking to support families and individuals facing multiple disadvantages.

Jake Berry: What steps his Department is taking to support families and individuals facing multiple disadvantages.

Chris Skidmore: What steps his Department is taking to support families and individuals facing multiple disadvantages.

Iain Duncan Smith: My Department’s reforms of the welfare system are to support people with difficulties entering the world of work. We have considered this matter extensively and are introducing support that is tailored to the needs of individuals to get them closer to employment and to tackle the entrenched worklessness at the heart of that. That includes £200 million of European social fund support for families with multiple problems. Local authorities play a critical role in the delivery of that support and we urge them to consider it to be as important as we do.

Stuart Andrew: I welcome the fact that about half the organisations involved in the delivery of this scheme are voluntary. Does my right hon. Friend agree that local charities are often best placed to provide the tailored and personalised support that such families need?

Iain Duncan Smith: It is true that voluntary sector organisations tend to deal with the whole person, rather than, like Government Departments and even sometimes local authorities, considering specific issues while forgetting that many of them knock on to each other. Such organisations have an important role to play. We should not ignore the fact that local authorities and Government Departments have to get their act together and make sure that when dealing with families with multiple problems, they talk to each other—always, there is a tendency for them not to do so. The good authorities hub up all the services around the family, which is at the centre, so Health, Work and Pensions, Education and all the Departments involved start to co-ordinate their activity, rather than spend all that money and get nowhere.

Paul Maynard: One of my wards, Claremont, is, according to the latest DCLG statistics, the fifth most deprived ward in the country, and I see daily the hurdles that families have to overcome to deal with some of the entrenched problems they face. I realise that no single agency can solve them, nor indeed can any single Government Department. Will the Secretary of State explain what he is doing with other Departments to ensure that all troubled families get a whole-of-Government approach, rather than a series of unconnected initiative-itises?

Iain Duncan Smith: My hon. Friend raises a good point. That is why the Prime Minister asked specifically that Louise Casey operate and head up a unit, reporting to my right hon. Friend the Secretary of State for Communities and Local Government, which is looking at the 120,000 worst affected, most difficult families. The idea, as I said earlier, is that, working with her, local authorities nominate the families. She wants them to hub up services to make sure that the pooled amount of money they get is spent on life-changing actions, not the tokenistic box-ticking that too often takes place.

Jake Berry: Does my right hon. Friend agree that the best way to escape the silo mentality in Government Departments and local authorities is to champion the voluntary sector in helping to support families in areas of multiple deprivation, such as those in my constituency? Home-Start is a fantastic charity that does such work in my area. Will he support it?

Iain Duncan Smith: Indeed I do. Home-Start is a remarkable charity and I am sure that right hon. and hon. Members on both sides of the House will give it their full support. It is worth bearing in mind that the families it deals with are very much in that category of worst and most troubled, with children growing up with parents who often have multiple issues themselves—sometimes serious drug addictions—and sometimes the money given to the families does not get down to where it benefits the children. It is worth reminding the House that 1.8 million children live in workless households, which gives them a difficult start in life.

Chris Skidmore: Some of the families and individuals facing multiple disadvantages are also family carers and young carers. What reassurance can the Secretary of State give the House that the Government will recognise those who have a caring role when introducing this fantastic support package?

Iain Duncan Smith: That is very much part of what we are trying to do and we will certainly recognise such roles. After all, we recognise fully that the effort given beyond the state multiplies many times the amount given by the state. Without that support—that voluntary and family work with people with difficulties—it would be almost impossible for the state to operate.

Tom Clarke: Will the right hon. Gentleman join me in paying tribute to Lord Ashley, who was passionately committed to people with disabilities and pursued that work both in this House and in the other place? As a further tribute, will he ensure that, in his Department, the needs of people with hearing impairments are met as they should be able to expect?

Iain Duncan Smith: Indeed I will. The right hon. Gentleman reminds us that we should all pay tribute to a brilliant campaigner, if I dare say, and supporter of people with disabilities. All of us in this House and the other place know the effectiveness of his campaigns and stand in awe of someone who dedicated his life as he did to supporting vulnerable people.

Michael McCann: Yesterday, I was contacted by my constituent Edward Connolly. Edward and his wife have four children under 10, and Edward is recovering from prostate cancer. He works 16 hours a week and his employer cannot give him any more hours. He cannot access the Work programme, and he is losing £250 a month in tax credits. Can the Secretary of State tell me how he proposes to protect the Connolly family from the multiple disadvantages that have been introduced by this Government?

Iain Duncan Smith: If the hon. Gentleman wants to write to me directly about that, I am very happy to speak to the individual concerned and his family. Clearly, we want to do the best by them. That is the whole point of universal credit, which will benefit him enormously at 16 hours, and other hours too, whereas the present system, as the hon. Gentleman knows, targets only specific hours, rather than all the hours that people work. I am happy to deal with that case directly.

Gerry Sutcliffe: May I add my condolences to the family of Lord Ashley, who was a tremendous worker in both Houses? The Minister is right: it is difficult to deal with families with multiple disadvantages. The difficulty is that that group is growing wider now because of people losing disability or other benefits. How will the Minister make sure that we maintain an up-to-date list of the families who have problems—a list that is going to grow?

Iain Duncan Smith: The hon. Gentleman is absolutely right. This is one of the big issues that we have to deal with. The reason why Louise Casey was asked to do this work was so that she, working with the local authorities, could start to map out where the most difficult families are in their areas. The key thing—I come back to this—is that it is ultimately local authorities that will and should know where these families are. There are some good examples. In Westminster the council has already hubbed up the issue and got organisations working with it; other local authorities are not so good. I am not here to name and blame, but I want local authorities to act with Louise Casey and the team to make sure we map those families, as the hon. Gentleman so rightly asks us to do.

Grahame Morris: The Secretary of State refers to Louise Casey, but my understanding is that Emma Harrison was paid £8.6 million in dividends last year from her company, A4e, which was appointed by the Prime Minister to head up that programme, but she has now resigned. Can the Secretary of State list her main achievements?

Iain Duncan Smith: Nice try, but the hon. Gentleman has got it wrong. Emma Harrison had nothing to do with the programme. Louise Casey has always been heading it up. I understand why he wants to elide the issues, but it is not true. Emma Harrison heads an organisation and was asked to give some advice, I understand, to 10 Downing street on other issue to do with families, but she has not controlled this issue at all. I hope the hon. Gentleman will try again some other time.

Employment and Support Allowance

Katy Clark: How many blind people had their contributory employment and support allowance withdrawn in the last month for which figures are available.

Chris Grayling: May I associate myself also with the remarks about Lord Ashley? He was one of my constituents. He and I worked together closely on the future of Epsom hospital. He was a great campaigner, as well as being a lovely man, and he will be much missed.
	Assuming that the hon. Lady is talking about the changes in the Welfare Reform Act, the answer is that the change has not yet come into force so no one has had their benefit withdrawn yet.

Katy Clark: I thank the Minister for his answer and associate myself with the comments about Lord Ashley. A 56-year-old blind constituent came to my surgery a fortnight ago. He currently receives incapacity benefit but is very concerned about the Government’s proposals
	in relation to employment and support allowance. What can the Minister say to him and to the many other blind people who are worried that they will no longer be eligible for benefits under the Government’s proposals?

Chris Grayling: It is obviously difficult to be exact in an individual circumstance without knowing about the case, but my message to all those in receipt of benefits is that this change affects only those in the work-related activity group who have the potential to return to work and who have another means of income or who have savings in their household. It does not affect those who cannot work in the support group. It does not affect those who need the financial support through an income-based benefit. It affects only a minority of claimants who have the potential to return to work and have other means.

Duncan Hames: I understand why the Minister would want assessments to consider people individually. However, the frameworks for those assessments need to be got right. Take, for example, how a blind person may fare in applying for the new personal independence payment. Will the Minister and his colleague look again at the weightings that will apply to the activities supported by this payment, since if someone with full sight loss is unlikely to qualify for the enhanced level of support, surely there would be a case for changing the weightings?

Chris Grayling: We are trying to get this right. We want a reform that produces a system that reflects genuine disability and does not provide support to those who do not need it. We are in the middle of a consultation about this. I ask my hon. Friend to take part in that consultation and to encourage his constituents who may be concerned about the reform to do so. We want to get it right.

Ian Paisley Jnr: What message has the Minister for my constituent, Annie McAlonan, who was on income support and incapacity benefit and has now been transferred to ESA but has failed the medical examination? This woman has breast cancer and ongoing medical difficulties associated with that condition, yet she is told that she is now fit for employment and has to seek employment. Is this not a classic case of welfare reform failing the most vulnerable?

Chris Grayling: It is under different leadership in Northern Ireland, but let us be absolutely clear that someone who is undergoing treatment for cancer and is having chemotherapy and radiotherapy would, in almost all cases, be in a support group and be receiving long-term care. I do not know enough about the circumstances of the hon. Gentleman’s constituent to be exactly certain where she is in the course of her treatment, but one of the changes that we made on coming to office was to improve support for cancer patients, not to reduce it.

Richard Fuller: A constituent visited me during the weekend to express her concerns about her husband who is blind and who has been informed that he will lose ESA in five months. He is taking a course to enable himself to get back into work, but it will take longer than five months to complete. What additional support may be provided to people in his situation to enable them to get back into work?

Chris Grayling: It very much depends on the circumstances of those concerned. The only people in danger of losing ESA as a result of those changes are those with other financial means in the household. It may be that they gain an additional entitlement to housing benefit and tax credits as a result of the changes, but we do not want to apply a one size fits all through the system to those who are blind or partially sighted. Some will need long-term support as a result of their conditions, and we will want to help others with long records in employment back into employment as quickly as possible.

Work Programme

Alex Cunningham: What support he plans to provide to young people who leave the Work programme without a job.

Chris Grayling: The Work programme will help and is helping a significant number of people into lasting work. We are trialling two approaches to supporting the very long-term unemployed. Those trials will inform the development of a national programme of support from the summer of 2013 for those leaving the Work programme who still need to find employment and need further help.

Alex Cunningham: Young people deserve the offer of a real job if they are out of work long term. Why does not the Minister put in place Labour’s real jobs guarantee to ensure that young people have the opportunity of real jobs with training and time to search for a job, instead of dropping them like a stone?

Chris Grayling: We have to remember that the funding that underlies Labour party policy has already been announced for, I believe, nine different purposes of late. The programmes that we have put in place to help young people are much more cost-effective than the previous Government’s programmes, and much more affordable at a time when, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) reminded us, there is no money left, and they are making a real difference today.

Robert Halfon: Is not the best way to help these young people the investment in the hundreds of thousands of apprenticeships that give young people the skills they need?

Chris Grayling: I completely agree. My hon. Friend has done a first-rate job in promoting apprenticeships in his constituency and in Parliament. The apprenticeship dimension to the youth contract will be an important part of getting young people into work. This is a much better way forward to create long-term career opportunities for young people than the short-term placements out of the private sector that were the hallmark of the previous Government.

David Lammy: Will the Minister share his concerns with the House about the rising level of long-term unemployment among London’s black youth, now three times the level of their white peers? Why is it that in Tottenham, 87% of Haringey’s young residents are not entitled to the wage incentive scheme under the youth contract? This is a real concern.

Chris Grayling: The only young unemployed people in Haringey not entitled to access funding under the youth contract are those who have not been out of work for very long. I genuinely share the hon. Gentleman’s concerns about young black unemployment, and that is one reason why we have created for Jobcentre Plus the flexible support fund, which enables our local offices to target support, as it is indeed doing in Haringey, at organisations such as the Tottenham Hotspur Foundation, which is working with young black people. The figures that the Labour party keeps putting forward about long-term youth unemployment are completely distorted by the fact that it used to hide people in the training allowance, which did not show up in the figures, and we no longer do that.

Flexible Support Fund

Guy Opperman: What steps Jobcentre Plus is taking to use the flexible support fund to support claimants into work.

Iain Duncan Smith: Referencing that last answer, we are all rather proud of the flexible support fund. It is a bold scheme that changes the direction of travel for jobcentres, which until 2011 worked in a static and rigid way. We are getting more flexibility, and the flexible support fund allows advisers to target money at individuals who may need support in getting to job interviews or buying the right kind of clothing, which is a big and bold change.

Guy Opperman: How has the flexible support fund actually provided funding to local partnerships to address those barriers to work, and will the Secretary of State write to me with specific evidence relating to the north-east?

Iain Duncan Smith: Indeed I will write to my hon. Friend. We have looked again at the flexible support fund and increased its flexibility and what advisers can do. Let me give some examples. General advisers in jobcentres can give up to £300—raised by over £100—to whatever specific area they think needs it. Senior operational managers can give up to £500, district managers can give up to £50,000, and work service directors can give up to £100,000, so the scope is there for them to do that flexibly. Many awards have been made, for example £985 for a class 1 HGV driver’s licence, so there is scope. I advise right hon. and hon. Members on both sides of the House to remind their young unemployed and other unemployed constituents that there is scope for them to be supported if they have difficulties.

Pension Funds

Julian Huppert: What steps he is taking to ensure that pension funds adopt ethical and infrastructure investments.

Steve Webb: If I may refer briefly to the grouping of earlier questions, Mr Speaker, I understand that we failed to notify my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) and
	my hon. Friend the Member for East Dunbartonshire (Jo Swinson) of the grouping and so apologise to them and to you.
	Pension scheme trustees can consider companies’ environmental, social and governance practices. I am clear that trustees’ duties do not require them simply to maximise short-term investment returns. On infrastructure, the autumn statement set out details of a memorandum of understanding signed by the Government with two groups of UK pension funds to support additional investment in UK infrastructure.

Julian Huppert: I thank the Minister for his comments. He will be aware of the whole range of investments that give more than just short-term financial returns. For example, the Cambridge Retrofit programme, which was launched last week, will try to retrofit every building in Cambridge by 2050. However, how will he communicate with trustees and ensure that they are aware that their fiduciary duties do not prevent them from doing this, because many of them seem to be unaware of it?

Steve Webb: The Pensions Regulator communicates regularly with trustees and provides a trustee toolkit on its website that sets out their duties, but I think that auto-enrolment provides an opportunity for ethical investment. For example, the National Employment Savings Trust will specifically have an ethical fund for those who wish to invest in that way, and I hope that the schemes my hon. Friend refers to will seek to find investment through that sort of route.

Unemployment (Bristol)

Kerry McCarthy: What recent estimate he has made of the level of unemployment in Bristol.

Chris Grayling: The latest estimate for the level of International Labour Organisation unemployment in Bristol, produced by the Office for National Statistics, is 21,400.

Kerry McCarthy: Does the Minister know whether the Prime Minister, on his visit to Bristol today, will take the time to meet some of those affected by long-term unemployment, which is up by 72% in the past year and a staggering 15,000% among young people, or was the hon. Member for Mid Bedfordshire (Nadine Dorries) correct when she described the Prime Minister and the Chancellor on the “Daily Politics” show today as
	“two arrogant posh boys who show no remorse, no contrition, and no passion to want to understand the lives of others”?

Chris Grayling: I cannot speak for the Prime Minister, but I can say that I have been to Bristol recently and spoken with unemployed people there. I can also tell the hon. Lady that the figures she quotes are nonsense. She and her Labour colleagues keep forgetting the fact that they used to hide large numbers of unemployed people on a training allowance, which masked the true picture of long-term unemployment. I can absolutely assure her that genuine long-term unemployment in her constituency is not up by 72%.

New Enterprise Allowance

Julian Smith: What assessment he has made of the effectiveness of the new enterprise allowance.

Chris Grayling: We have not yet made a formal assessment of the effectiveness of the NEA because it is too early to draw robust conclusions. We will of course carry out a proper impact analysis in due course. Participation in the scheme has so far proved popular; at the end of November last year, when the most recent figures were published, nearly 2,000 new businesses had been created, and many more have been created since then.

Julian Smith: I thank the Minister for that answer. Is it not correct that Yorkshire and the Humber has one of the highest take-ups of the scheme anywhere in the country? Has he thought about how we could increase the number of places on the scheme in order to allow people who want to set up a business to start much earlier?

Chris Grayling: Yorkshire and the Humber has indeed proved to be a pathfinder for the scheme. I am aware of how popular it is and am now looking at ways in which we could modify it in order to provide a greater focus on those areas where demand is high and see whether it makes sense to allow people to access it earlier.

Work Capability Assessment

Yvonne Fovargue: What assessment he has made of homeless people’s experiences of the work capability assessment.

Chris Grayling: In recognition of the specific issues that homeless people encounter, information and advice related to the work capability assessment is provided through their Jobcentre Plus adviser when they collect their benefit payment via the personal issue payment process.
	We have also been in touch with the Department for Communities and Local Government about homeless people. Through this, a meeting has been arranged between Professor Harrington, the work capability assessment independent reviewer, and several charities representing homeless people. We will consider fully any recommendations he makes.

Yvonne Fovargue: Upcoming research from Crisis shows that almost half the homeless people questioned felt that the health care professionals at their assessment had a bad or very bad understanding of homelessness and how it impacts on their lives. What steps are being taken to raise awareness among the health care professionals conducting that research and carrying out the work capability assessment?

Chris Grayling: I have invited all the charitable groups that have an interest in WCA matters to feel free to offer guidance and training sessions to our decision makers, and to share their views so that any appropriate elements can be included in our training programmes, but of
	course the best way of helping the homeless is to help them into employment—to use the income to find a home and to sort their lives out properly.

Damian Hinds: Given the prevalence of mental health issues among homeless people, is not Professor Harrington’s focus on such issues in his second report particularly important for them? Does the Minister also welcome the view of charities such as Homeless Link that Professor Harrington’s work is making a material difference to the operation of the work capability assessment?

Chris Grayling: It might be appropriate at this point to pay tribute to Professor Harrington for the work that he has carried out. Of all the things that I have heard over the past 18 months about the work capability assessment, one thing I have not heard is anyone criticise Professor Harrington, who has done his job excellently and independently.

Single-tier State Pension

Jo Swinson: When he plans to bring forward his proposals for a single-tier state pension.

Steve Webb: I apologise to my hon. Friend for not giving her a chance to ask her question earlier on.
	We will shortly bring forward a White Paper on the single-tier pension, as my right hon. Friend the Chancellor of the Exchequer announced.

Jo Swinson: I thank my hon. Friend for that reply. He and I have long campaigned for a citizen’s pension, to be paid at a decent level to all pensioners, without the need for bureaucratic means-testing and, of course, the problems that that creates, with many pensioners losing out. I welcome the plans for a single-tier pension from 2016. Will my hon. Friend confirm that, although the current proposals apply only to new pensions, there is nothing to stop a future extension to all pensioners if the money can be found?

Steve Webb: Obviously, we will not write the law in a way that prevents all pensioners from being brought within its scope, and I am sure my hon. Friend will press for that. We are aware that, under our proposals, getting on for more than 80%, and eventually 90%, of pensioners will qualify for the pension, so it will have many of the features of a citizen’s pension but be based on 30 years of contributions or credits.

Mr Speaker: Well, that exchange was worth waiting for, I am sure the House will agree. I thank both Members.
	Topical Questions

Tom Greatrex: If he will make a statement on his departmental responsibilities.

Iain Duncan Smith: In recent weeks we have published new figures on the incapacity benefit reassessment programme, so I thought it would be helpful to the House if I just reminded Members of the figures. Throughout Great Britain as a whole, some 37% of people have been found fit for work, with another 34% expected to be able to work in the future, with the right support. These figures show that the programme is working.

Tom Greatrex: Does any Minister think it appropriate that, while undertaking a contract on behalf of the Secretary of State’s Department, Atos Healthcare, first, published misleading information on its website; secondly, refused to comply with the Advertising Standards Authority inquiry into that information; and, thirdly, failed to correct it until alerted to do so by the media last week—several weeks after the compliance notice was issued? Do they think that that is acceptable for an agency working on behalf of the Government?

Chris Grayling: We always discuss issues such as that one very carefully with our subcontractors, but I do not believe that it affects the professionalism of the health care professionals who are carrying out the work on our behalf. Many are doing a very difficult job in challenging circumstances—but doing the best for people who claim incapacity benefit and who could have a better future.

Simon Hughes: Following earlier questions on pensions, will the Minister put on record the fact that the Budget and the Government’s decisions are the best news ever for pensioners now, as well as for pensioners in the future? The press and the Opposition appear to have somewhat missed the point.

Steve Webb: My right hon. Friend is aware that, as Pensions Minister, I am responsible for people who are currently pensioners and for everyone who will be a pensioner, which is everybody, and we have good news for today’s pensioners: not only the highest-ever cash increase but, more than that, year-on-year above-inflation increases whenever earnings grow more rapidly—and, incidentally, an increase in the age-related personal allowance this April of more than £500.

Liam Byrne: May I associate myself with the words of tribute to Lord Ashley, who was a formidable champion of the people whom we came into politics to serve? He will be sorely missed in both Houses, but his inspiration will live on.
	Two years before the election, the Prime Minister gave the pensioners’ pledge:
	“The Government I lead will make sure that older and retired people are treated with dignity and given the quality of life they deserve.”
	Will the Secretary of State therefore confirm, as the Institute for Fiscal Studies has said, that pensioners will be £315 a year worse off, thanks to the granny tax?

Steve Webb: The changes announced by the Chancellor in the Budget will increase the age-related personal allowance this April by more than £500 and leave it at £10,500 for 65 to 74-year-olds while the allowance for those of working age is levelled up to that figure, at which point all people will have a substantial tax-free allowance that will be increased thereafter.

Liam Byrne: This is why pensioners on the doorstep are so cross—they know that they have been hoodwinked by the Government. This measure was dressed up in the Budget as a simplification. I think the Secretary of State detains his barbers for about as long as I do. Does he go along and ask for his hair to be “simplified”? I do not think so. A cut is a cut. On top of granny tax 1, we now learn of granny tax 2. Will the Minister admit that from 2014 pensioners will face a further cut of £900, and apologise for trying to keep it secret?

Steve Webb: I do not recognise the figures that the right hon. Gentleman quotes, but I assure him that what matters most to the pensioners to whom I speak is a decent state pension. After 30 years of the pension declining in value relative to earnings, from now on it will rise every year by whatever is the highest of earnings, prices or 2.5%. There will be a guaranteed increase every year that matches inflation or is above inflation. That is something that pensioners value.

Mark Spencer: Does the Minister recognise that traditionally the Child Support Agency has targeted fathers who contribute willingly, rather than chase the more challenging maintenance evaders?

Maria Miller: I understand that the current system feels unfair to many people. However, I reassure my hon. Friend that we do not target people in that way. We want to ensure that more people receive positive financial support. The tragic fact is that only half of children living in separated families currently have a positive financial arrangement in place.

Ann McKechin: The Scottish Trades Union Congress reported today that the number of young Scots who are in receipt of unemployment benefit for more than 12 months has increased by 1,100% since 2007. Will the Minister confirm that those 5,000-plus young people will not be abandoned? What guarantee will he give about how many of them will be in work by this time next year?

Chris Grayling: Once again, it is the same story from the Labour party and its supporters. Let us be clear that what has changed in long-term unemployment since we took office is that we no longer hide young unemployed people—or, indeed, older unemployed people—on a training allowance, which distorted the figures by as much as 30,000 each month. That is why long-term youth unemployment and unemployment appear to be rising. It has nothing to do with economic change and everything to do with how disingenuous the previous Government were.

Amber Rudd: The Child Support Agency’s office for London and the south-east is in Hastings. It employs nearly 1,000 to do an often difficult and challenging job. When the Minister brings forward her reform plans, I ask her to ensure that this important service is not relocated, because a great deal of local expertise has been built up.

Maria Miller: I thank my hon. Friend for giving me the opportunity to pay tribute to the excellent work of the Child Support Agency staff in Hastings. I reassure her that the changes that we are planning will have a negligible effect on delivery staff.

Julie Hilling: After the hard-fought and successful campaign to get the higher rate of the mobility component for blind and partially sighted people under disability living allowance, will the Minister reassure me that no blind people will be disadvantaged by the transition to the personal independence payment and that such people will continue to receive the higher rate of the mobility component?

Maria Miller: The hon. Lady will know that we are in the process of finalising the assessment criteria for the new personal independence payment. I am sure that she will be reassured to know that I have met a number of organisations that represent blind people. I remind her that with the personal independence payment, we are trying to recognise the barriers that people face to living an independent life, and not simply to categorise them based on their impairment.

Laura Sandys: I thank the Minister for agreeing to come to a jobs fair in Thanet in June. I am sure that he shares everybody else’s pleasure at seeing that there has been a small drop in youth unemployment. What more can I tell the young people of Thanet that we are doing to help them get the jobs that will be advertised at the jobs fair?

Chris Grayling: I am sure we were all pleased to see the small fall in youth unemployment announced last week, but there is a long way to go in tackling what is a big challenge for this country. I hope that the employers of Thanet will respond to the wage subsidies in the youth contract by giving young unemployed British people their first step on to the ladder of employment. That is what we all want to happen.

Grahame Morris: We have heard a lot of talk from the Government about creating an information revolution in Whitehall, but with the Secretary of State’s Department leading a charge by outsourcing many of its responsibilities, will the same measures of transparency apply to private sector companies such as A4e and Atos as currently apply to public sector bodies?

Iain Duncan Smith: First, with respect to the hon. Gentleman, I do not think that this Government, or this Department under its current management, need to take any lessons from one of the most secret Governments in history. If he would like to look on our website, he will see that we publish a huge amount of data on all the contracts that we let, down to a very low level. He
	can find out more information now, as a direct result of what we do. Obviously, private contracts are for private people.

Anne McIntosh: Would the Minister like to clarify his earlier remarks about partially sighted people not being means-tested and judged on their savings but being awarded benefit on the basis of their need?

Chris Grayling: That is of course our approach right across ESA. We do not apply a one-size-fits-all approach. Those with the potential to return to work will receive help to do so, those who will be able to return to work in due course will get support and guidance along that journey, and those who cannot be expected to work will receive long-term unconditional support in the support group. That is absolutely how the Government should seek to work.

John McDonnell: Members throughout the House, including Ministers, have emphasised the importance of the care that must be taken in dealing with people with mental health problems as they approach their medical and capability assessments, particularly if they lose benefits. Some anecdotal evidence is emerging of suicides taking place among people who have lost benefits. Have the Government explored any of the coroners’ reports of cases in which there has been a reference to the loss of benefits as a contributory factor, and what lessons have been learned?

Chris Grayling: We will always examine something like that very carefully indeed when it happens. So far, my experience is that the stories are usually much more complicated, but that does not mean we are not doing the right thing. I passionately believe that we should help such people, particularly those with mental health problems. I have met people who have been out of work for years and years with chronic depression, but whom we are now beginning to help back into work. We have to be careful, and we examine such situations carefully when they arise.

Jessica Lee: Will my hon. Friend join me in congratulating Erewash credit union on its participation in the back to work scheme? A young person I met on Friday who is participating in the scheme is extremely enthusiastic about their prospects and future and now feels ready for the next step back to work.

Steve Webb: I pay tribute to the credit union in my hon. Friend’s constituency. As she knows, the Department has given credit unions significant financial support. We have recently received a report on their future development and expansion, and we hope to bring forward proposals shortly to give them a greater role and an extended way of helping people on low incomes, through both finance and initiatives such as she describes.

Heidi Alexander: Last Friday I attended Lewisham jobcentre and was told that between 1,800 and 2,000 people visit it every day. What extra resources are being provided to jobcentres in areas of acute unemployment to help people access work?

Chris Grayling: Most recently, we have increased the number of youth advisers so that we have additional support in places such as Lewisham to enhance our work to help unemployed young people get into work. I hope that those advisers will make a difference to young people’s prospects.

Stephen Metcalfe: Is the number of people in receipt of out-of-work benefit higher or lower now than it was in May 2010?

Chris Grayling: I am very pleased to tell the House that since May 2010, the total number of people in this country on out-of-work benefits has fallen by 45,000.

Stephen McCabe: Is the Minister familiar with the recent freedom of information request that revealed that 1,100 employment support allowance claimants died between January and August last year after being assessed as fit for work? What steps is he taking to investigate this rather large number of deaths, and how come so many of those people were assessed as fit for work?

Chris Grayling: I am afraid that we cannot simply extrapolate one of those facts from the other. Sadly, we are all mortal, and circumstances arise that we do not expect. As I said to the hon. Member for Hayes and Harlington (John McDonnell), we always look very carefully at individual cases, but the Government are doing the right thing in trying to provide support to help people to get back into work. The worst thing for their health and well-being is for them to be on benefits for the rest of their lives if they do not need to be.

Helen Grant: What discussions has the Minister had with the Department for Communities and Local Government on council tenants starting a business in their homes?

Iain Duncan Smith: We discuss such matters at all times with the Department for Communities and Local Government. I promise my hon. Friend I will ensure that I raise that one.
	May I take this opportunity to say to my opposite number, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), that I wish him the very best of luck if he heads off to be mayor? I have thought of a great slogan: “Byrne for Birmingham: not just 9 to 5, but also a ‘night mayor’.”

IMF

George Osborne: Let me update the House on this weekend’s G20 and International Monetary Fund spring meetings and the Government’s decision to make a loan of just under £10 billion, or $15 billion, to boost the IMF’s reserves.
	As I have said to the House on many occasions, Britain has always been one of the IMF’s largest shareholders and biggest supporters. We helped to create the institution over 60 years ago, and our predecessors determined that countries would never again turn their backs on the world’s problems, but instead come together to solve them. In every single decade since the 1940s, the UK has been part of global agreements to increase the IMF’s resources. Why has every single post-war British Government done that? It is because they recognised what we again recognise today: that Britain, as a proud, open, trading nation, has a huge national interest in a strong IMF as a force for stability and free markets; and that Britain exerts its influence in the world partly through the institutions it helped to create, such as the IMF, where we remain one of the few countries to have our own seat on the board.
	That was the case 60 years ago when the world recovered from the ravages of a global conflict borne out of depression and disastrous economic nationalism. It was the case when Latin America struggled in the ’80s and the Asian economies collapsed in the ’90s. It was the case at the London G20 summit, when Britain’s economy was at the centre of the storm. It remains the case today, as we cope with the biggest debt crisis of any of our lifetimes, and when the epicentre of the problem now lies on our doorstep in Europe and with some of our largest trading partners, including Ireland, the home of banks deeply connected to our own banking system.
	We will not turn our back on the IMF, or turn our back on the world. That would be a betrayal of our country’s interest and our country’s identity, and incidentally, it would at the same time be a betrayal of my party’s history.
	It is because of the decisive action this Government have taken to deal with our own debts that we can now be part of the solution and no longer part of the problem. Let us not forget that in 1976 under a Labour Government this country itself needed an IMF bail-out. If we had a Labour Government today, their Chancellor could very well be explaining to the House the heavy terms of a loan from the IMF, not a loan to it. Instead, we have taken action that means Britain is a safe haven in the storm—action that means interest payments are lower for families, businesses and the taxpayers who are funding the huge national debt that has been racked up in recent years.
	However, in the modern, global economy, we simply cannot act alone. At the annual IMF meetings last autumn, there was a real sense that the world economy was staring over another precipice. The feeling at these spring meetings was that we had stepped back from the brink but that the risks remained. Markets are calmer, banks are finding funding and signs of confidence are emerging—figures last week in Britain showed unemployment falling and retail sales up, and last week the IMF revised up a little its global and UK growth
	forecasts—but, as the IMF rightly warns us all, the global economy remains very fragile. We see that in the Spanish bond spreads and the disappointment over the latest American jobs data.
	In such uncertain times, we want the IMF to be able to cope with whatever is thrown at it—the worst-case scenario—instead of hoping for the best, which is why, for almost a year now, I have said that we would be willing to consider the case for additional resources for the IMF. I set out in January four conditions for British support. The first was that the IMF should only support countries, not currencies, and that is now clearly expressed in the communiqué issued this weekend. The second condition was that full IMF rigour and conditionality would apply to any future programmes. That too was agreed explicitly in Washington this weekend. Britain led the way in making it clear that that conditionality would not be restricted to a country’s fiscal policies but would also include structural reforms to increase growth.
	The third condition was that we needed to see more resources from the eurozone for its own firewall—we had to see the colour of its money first. The IMF cannot be a substitute for action by the eurozone to stand behind its own currency. In December, the European Central Bank began its massive long-term liquidity operation, which we publicly called for and privately urged. Last month, the eurozone member states added €200 billion to their firewall, bringing the total to more than €700 billion. May I add that the Government have not added a single pound of British taxpayers’ money to those eurozone funds, having got us out of the commitments the last Labour Government sucked us into. Now, €700 billion is not as much as some wanted or what the IMF itself asked for, so, as I will explain, the size of additional IMF resources from non-eurozone countries is proportionate to the eurozone’s action.
	The last condition I set was that other G20 countries had to make contributions—that Britain would not act alone. This weekend, we were very far from being alone. The eurozone provided an extra $200 billion to the IMF. France, which has the same shareholding as Britain, contributed $40 billion, and Germany, $55 billion. If it had just been the eurozone, Britain would not have contributed, but it was not: Japan contributed $60 billion; South Korea, $15 billion; Mexico and Singapore took part; and Australia, with a population one third our size and 10,000 miles from Europe, contributed $7 billion, with the support of all the main parties there.
	European countries not in the eurozone have also committed loans—from Sweden and Denmark, to Switzerland and Norway, which are not even in the EU. Some have suggested that the BRIC counties did not contribute. That is not the case. India, Russia, and—yes—China have all made firm commitments to contribute resources and will set out the exact sums in the coming weeks. [Hon. Members: “How much?”] We will see in the next few weeks. The total of the expected commitments is set to be more than $430 billion.
	It is true that America has not offered a loan, and mainly for that reason nor has Canada, but then America did not offer a bilateral loan at the London G20 summit. The reason the US Treasury Secretary gives is clear. The US, because it is the global reserve currency, has in the last few months offered dollar swap lines to the eurozone with outstanding balances peaking at more than $85 billion, which far exceeds any contribution anyone else has
	made. Its exposure is direct to the eurozone. What we and others have offered is something very different: a commitment to lend to the IMF should it need the resources.
	In Britain’s case, that commitment is denominated in the IMF currency of special drawing rights and equates to just under £10 billion—about $15 billion. That is within the mandate authorised by the House of Commons and voted on twice in the past 18 months. As I set out to the Select Committee on the Treasury earlier this year, if I had felt that Britain should have contributed more, I would have asked Parliament for the authority to make a larger loan. However, $15 billion is in line with Britain’s quota share at the IMF—it is the same as previous loans we have made—and our loan is available only once the quota reform deal put together in 2010 is ratified by the required majorities of the countries that signed up to it. Our £10 billion is therefore proportionate to our shareholding and similar to our previous contributions.
	Let me end by saying this. No one believes that a well-funded IMF on its own is the solution to the problems of the eurozone. Eurozone countries need to make painful adjustments to their public finances and external deficits. It is a difficult path that they have to walk, although the new Governments in the likes of Ireland, Portugal, Spain and Italy are walking it. However, that is the logic of the single currency that they are all committed to. That is why I am opposed to British membership of the euro, why I shut down the euro preparations unit in the Treasury and why under this Government Britain will never relinquish the pound.
	However, opposition to our membership of the euro and the problems in the eurozone should not be a reason to turn our back on the IMF; if anything, they make the case for a stronger IMF. I know that when we offer our loan to the IMF, it is presented by some as British taxpayers simply handing over money to the euro—supposedly, money that we will never get back and which could have been used on public spending here at home—but just because it makes for an easy newspaper headline does not make it true. Lending to the IMF is a loan to the most credit-worthy institution in the world. It is a loan that comes with interest. The IMF has preferred creditor status: it gets paid back even when other creditors are not. It is true that, very occasionally, countries have defaulted on their obligations; but if eventually they want to regain access to international funding, they have to pay back debts to the fund, and in the end they all do. The IMF is designed to manage this. It lays down tough conditions, has large precautionary balances and sits on large gold reserves. That is why no country has ever lost money lending to the IMF in its 67-year history.
	Let me be clear also that not a penny less will be spent on public services; nor will a penny more be levied in tax to fund our commitment to the IMF. Were the IMF to call for financing from the UK, we would exchange some of our foreign currency reserve for a claim on the IMF—in other words, we exchange a claim on one safe asset for another. That is why no one includes IMF loans in their calculations of Britain’s net debt or deficit, and nor do our sterling financing plans for the official reserves need to be changed. When it comes to lending to the IMF, therefore, I know of no other mechanism that is so clearly in the British and global interest, no other form of insurance against the world’s risks that
	has such potential benefits, and no other loan that can be provided with such low risks and which comes with interest.
	At home, this Government have confronted head-on the debt problem that we inherited from the last Government; abroad, we support the international effort for global stability. We are guided by Britain’s national interest. Britain does not walk away from its problems; it confronts them. It does not turn its back on the world; it helps to lead the world. We will do everything abroad to support the IMF and everything at home to avoid a bail-out from the IMF. Keeping the UK safe is the overriding mission of this Government.

Edward Balls: In thanking the Chancellor for advance sight of his statement today, let me begin by setting out three propositions on which I believe all parts of the House can agree. First, the ongoing crisis in the euro area is a major threat to the stability of the European and global economies, including Britain’s. Secondly, the International Monetary Fund is a hugely respected organisation that must be properly funded if it is to play its proper role. Thirdly, solving the euro crisis and ensuring that the IMF is properly resourced are both firmly in the British national interest.
	However, the agreement that the Chancellor signed up to at the weekend fails on all three counts. It will not speed up, but further delay the decisive action we need from European leaders to kick-start growth and empower the European Central Bank to act. If those extra resources were to result in the IMF stepping in to act when the European Central Bank would not, that would risk weakening the IMF as an institution. Furthermore, in those circumstances, allowing eurozone leaders further room for delay and exposing the IMF and British taxpayers’ money when rich eurozone countries will not act would categorically not be in the British national interest.
	Members across the House will find it baffling that that is precisely the view that the Chancellor took, just a few weeks and months ago. Following the G20 summit in October, when euro area leaders tried and failed to get international agreement on IMF resources to bail out the euro, he told the House:
	“But the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.”—[Official Report, 27 October 2011; Vol. 534, c. 471.]
	He went further in February when he told Sky:
	“We are prepared to consider IMF resources but only once we see the colour of the eurozone money and we have not seen the colour of the eurozone money”.
	Will the Chancellor tell us what has actually changed since then, because we have categorically not seen the colour of the eurozone’s money? The eurozone agreement that was reached last month was widely dismissed as a “sticking plaster” that merged two funds with no new money. As Wolfgang Münchau of the Financial Times stated:
	“Ignore the headlines. This is not an increase in the eurozone’s rescue fund”.
	In recent weeks, as market doubts have grown about Spain and Italy, market analysts have been clear that the eurozone bail-out fund has nowhere near the resources
	that it would need to stop a renewed crisis. There is still is no firewall, and the only institution that comfortably has the resources to act—the European Central Bank—is prevented from doing so because rich euro area countries refuse to put sufficient money at risk. So, let me ask the Chancellor this: does he really think that the eurozone’s firewall is sufficient? Is this really the “big bazooka” that the Prime Minister talked about last summer? Does the Chancellor really think that the ECB now has the political backing to act as lender of last resort, and so stop contagion spreading? No, of course he does not. So why is he now signing up to an agreement that will mean that the IMF will be pressured into supporting Italy and Spain because the ECB will not, exposing as meaningless his nonsensical “countries not currencies” slogan?
	Is it not the truth that the Chancellor is now conspiring in allowing the IMF to become the de facto central bank of the euro area, putting the resources of UK taxpayers and some of the world’s poorer countries at risk because rich euro area countries will not act? This deal might, for a short period, take the pressure off euro area leaders, but it will be at the cost of delaying a proper solution to the euro crisis, and it will undermine the IMF in the process.
	The Chancellor says that his UK critics, on both sides of the House, are “isolated” in the global community in opposing this weekend’s agreement, but the United States has not signed up to give more money either. The US Treasury Secretary said, just this month:
	“Europe is a very rich continent and they have the means to solve this on their own…I don’t think it is appropriate for the IMF to take on a larger role. The world needs to see that Europe is working on helping itself first. We are not going to shift our help for them so that the burden is on the American taxpayer”.
	Canada is not contributing more money either. This is what the Canadian Finance Minister said about euro area leaders this weekend:
	“They need to step up to the plate and overwhelm this issue with their own resources.”
	The Chancellor says that we are “out on a limb” on this issue, but with America and Canada there too, that is some limb.
	Will the Chancellor tell the House why he chose to tell us on Friday that he was contributing “just under” £10 billion more? With the US not contributing, that is clearly less than the UK’s quota share. Could it be that if he had contributed a fraction more, he would have had to come to the House and ask for parliamentary approval? After the Budget shambles—should I say the “omnishambles”?—of the last few weeks, is not the Chancellor running scared of those on both sides of the House of Commons?
	Could the Chancellor also explain what has happened to the UK’s contribution to the IMF through the new agreement to borrow? When an IMF quota was first increased in 2009, it was understood that it would be offset by a reduction in UK exposure to the NAB—the new arrangements to borrow. Let me remind the Chancellor what the Financial Secretary told the House last summer:
	“The G20 summit in London agreed on the importance of preserving the IMF status as a quota-based institution…so at the G20 meetings last November, agreement was reached to review
	the NAB and to reduce it in size once the quota increase was implemented
	.”—
	[
	Official Report, Second Delegated Legislation Committee, 
	5 July 2011; c. 3.
	]
	So let me ask the Chancellor this: can he update the House? Has the UK contribution to the IMF been reduced through the NAB as the quota increases, as the Financial Secretary said, or has the Chancellor found a back-door route to increase the net UK contribution by more than £10 billion, without the permission of Parliament?

Mr Speaker: I am sure the shadow Chancellor is bringing himself to his last sentence.

Edward Balls: Finally, Mr Speaker, as for the Chancellor’s claim that the UK has sorted out our problems, unlike the US, the UK is mired with the rest of the euro area in no growth, high unemployment and much more borrowing than was planned, so how out of touch can this deluded Chancellor get? He should have stuck to his guns this weekend. He capitulated. This agreement was bad for the euro area, bad for the IMF, bad for the British taxpayer and bad for the British national interest.

George Osborne: First, I congratulate the shadow Chancellor on running the London marathon yesterday and raising money for good causes, but his arguments are a bit like his marathon legs—wobbly and about to collapse. His response started so well. In the first 30 seconds, he said he supported increased resources for the IMF and supported Britain’s contribution to it, but spent the next 10 minutes telling us why he was against those things. He was in favour of the loan before he was against it. I have to say it smacks of the political opportunism and empty opposition that has been the hallmark of his shadow chancellorship.
	People in Washington this weekend who know the shadow Chancellor, because he used to help represent Britain at the IMF, were completely astonished by his opposition to the IMF deal. They wondered whether he was the same person who was in the Treasury for all those years and who wrote all those speeches for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about the importance of the IMF and of the international architecture being part of global solutions. Is it the same shadow Chancellor who said in November that
	“the Labour party supports an increase in the UK’s International Monetary Fund subscription”?
	He was asked in an interview why he opposed the Government’s decision and he said:
	“I support an increase in resources to the IMF”.
	Then, the interviewer said:
	“Sorry? I thought you didn’t.”
	He said:
	“No…I support an increase in resources for the IMF”.
	One is led to the conclusion that only political opportunism is driving the shadow Chancellor to the position he takes.
	The right hon. Gentleman asked just a couple of specific questions. I think I answered all of them in the statement, which he should have listened to before he asked his questions. The US Treasury Secretary went out of his way to welcome the deal, but pointed out that the US had not made a loan at the London G20 summit
	and did not do so again because of the swap lines. Since we talked about this in the autumn, the European Central Bank has provided $1 trillion of liquidity support and €200 billion extra to the firewall, but I completely agree that euro countries need to do more to ensure reforms in their own economies.
	Is the right hon. Gentleman really saying that, when a request is made for the countries of the world to come together at the IMF to provide increased contributions, Britain should stand apart from it? He represents a Labour party that stands, or used to stand, for internationalism and for the institutions of the world coming together. Now he has led the party down a complete blind alleyway. He even voted against the highlight of the Labour Government—the deal done at the London G20 summit. This is what the shadow Chancellor has done to his party—left it in no man’s land, not taken seriously at home and not taken seriously abroad. If he were ever in charge, we would be getting a bail-out from the IMF, not giving it a loan.

Mr Speaker: Sir Peter Tapsell?

Peter Tapsell: I had rather changed my mind about asking a question because of the extremely unappealing way in which the shadow Chancellor put his case; but in order to be consistent with everything that I said in October and November, I am bound to say now that I regard it as the prime duty of Germany to solve the European problem, and that I hope that this further support from the IMF will not weaken the pressure on the German Government to do exactly that.

George Osborne: Germany made a $55 billion dollar contribution to the IMF this weekend, which is a much greater contribution than the $15 billion that we are putting in, and it is the principal contributor to the various eurozone bail-out funds of which we are no longer part. However, I agree with the spirit of what my right hon. Friend is saying, which is that Germany needs to stand behind its currency. That is indeed a very important part of solving this problem.

Alistair Darling: I think it right for us to support the IMF, but is not something very wrong when it is having to pass the hat around because it is becoming increasingly concerned that the policies being pursued by the eurozone—and, within it, some of the most developed and well-off countries in the world—are making it more likely that those countries will have to draw on international help to sort themselves out? Would it not be far better if the eurozone countries accepted that until they clean up their banking system once and for all, and until they recognise that the austerity policies that they are imposing on the peripheral countries simply will not work—and there are very few people around now who think that they will work—there remains a greater risk that these funds will have to be called upon? It seems to me that, while it is all very well to have a rescue fund, it would be far better to deal with the root causes of the problem.

George Osborne: I welcome the right hon. Gentleman’s support for the decision to provide extra resources for the IMF. He was Chancellor of the Exchequer in 2009,
	when we last made a contribution to it, and, as I said a moment ago, I think that that was one of the highlights—if not the highlight—of the last Labour Government.
	The eurozone countries on the periphery are being asked to walk an incredibly difficult path. That is the consequence of being in a monetary union in which it is impossible to devalue. However, it is clear that Ireland, which has had to make some incredibly difficult decisions and take some very tough fiscal measures, is becoming dramatically more competitive—its current account is back in surplus, and its exports are increasing—so it is possible to walk that path.
	I certainly agree with the right hon. Gentleman that further action is required on the banking systems in Europe. A European directive which is currently being debated transponds the Basel agreement into European law, and we are keen for it not to be watered down so that it is not used to disguise problems in the European banking system.

Andrew Tyrie: Is not the lesson of the 1930s that the leading economic powers must stick together and support the global financial and trading system, and is that not exactly what the IMF decision is doing now? What we need is a strong and independent IMF. With that in mind, will the Chancellor tell us what discussions he has had with non-eurozone IMF members to ensure that the IMF sees off any special pleading from the eurozone?

George Osborne: I welcome the support of my hon. Friend, who chairs the Treasury Committee, for our decision to make a loan to the IMF, along with many other countries.
	This weekend, plenty of countries, including the UK, made very clear that a contribution to additional IMF resources must come with strict IMF conditionality. They made clear that there could be no special favours for eurozone countries that needed support, and that there was no question of creating some special eurozone fund for IMF resources. Any contribution from the IMF’s shareholders must go into general resources which could be used for eurozone countries or, indeed, for any other country that needed help.
	It is worth remembering that there are 53 IMF programmes, three for eurozone countries and 50 for other countries in the world, and that two of the largest programmes are for Poland and Mexico, which are not members of the IMF.

Gisela Stuart: Does the Chancellor not accept that the credibility of the IMF itself is put in question if it continues to provide support for eurozone countries that are, and remain, insolvent?

George Osborne: No, I do not accept that. For the IMF to walk away from the enormous problems that we all know exist in the eurozone would be a betrayal of why we and other countries created the IMF: to be there to help countries, including groups of countries, that get themselves into trouble. The IMF also provides advice and conditionality along with its loans. Having set up
	an institution to deal with global economic problems, it would be bizarre if, when some of the largest economic problems the world has ever known arise, we were to say that the IMF is not going to help.

Stephen Williams: The central unifying purpose of this coalition Government is to bring stability and credibility to the management of the United Kingdom’s economy and public finances. That, in turn, enables us to play a constructive role on the world stage. Does my right hon. Friend agree that, just as it is in the Swedish, Swiss, Australian, South Korean and Japanese national interest to give extra contributions to the IMF, it is in the British interest not just to help the eurozone, but to lend assistance wherever the IMF team’s assistance is required?

George Osborne: I agree with my hon. Friend. The coalition Government have taken very difficult decisions in order to make sure that our public finances are back under control, and we are seen by the world to be dealing with our debt crisis. After spring meetings in Washington at which countries not in the EU, including Australia, Japan, South Korea, Norway and Switzerland, all agreed to contribute to increased IMF resources, it would be truly bizarre if a British Chancellor were to come to the House today and announce that Britain is not contributing. [Interruption.] What did the shadow Chancellor say? [Interruption.] What? [Interruption.] What? The truth is that a Chancellor who came here and said he was not taking part when all those other countries, some of them on the other side of the world, were taking part, would have absolutely no credibility abroad.

Derek Twigg: Does the Chancellor believe that the eurozone is doing enough to help itself and its own countries? If he does not believe that, under what conditions would he support an IMF loan to any eurozone country?

George Osborne: I do not want to speculate about any future programmes that might, or might not, be required. What I want to do is make sure that the IMF is able to deal with whatever is thrown at it. That is massively in Britain’s national interest. We are talking about the source of 40% of the exports made by the businesses and factories of the constituencies we represent. For us to walk away from that at the moment would be bizarre. Does the eurozone need to do more? Yes, it does need to do more. For instance, as the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said, it needs to sort out the problems in its banking system, and it needs to make sure that the programmes that countries have been asked to embark upon are deliverable, but that is not an excuse for Britain not to take part in a global effort to support the IMF.

Malcolm Rifkind: I suspect that on this occasion Members on both sides of the House will have found the shadow Chancellor’s remarks to have been profoundly unconvincing. Does the Chancellor agree that the purpose of these funds is to assist in the restoration of the eurozone economy, the recovery of which is profoundly in our own interests? Does he also agree that the IMF must use all the powers at its
	disposal to ensure a rigorous application of its rules to those eurozone countries that are in trouble, in order to ensure that the mistakes that were made when the single currency was first formed are not repeated?

George Osborne: I completely agree with the former Foreign Secretary. The agreement at the weekend is about ensuring that the IMF is fully resourced to deal with whatever is thrown at it. Of course, if problems were to emerge and future programmes were to be required, there would be an enormous amount of scrutiny of what those programmes would consist of, what the conditions would be, and the like, but what we would not want at such a time, when the markets would no doubt be incredibly febrile and when confidence in Britain and other countries would be evaporating, is a question mark hanging over whether the IMF has got the money to solve the problem. That is why countries from around the world have decided to make this contribution.

Dennis Skinner: Does not the Chancellor realise that he would have a much stronger case on loans to the IMF if he was not practising austerity here in Britain and calling on all families to pay for the bankers? Does not he recall that when the IMF was set up we had a Labour Government who introduced a national health service, built a welfare state, built education for all and left us with fewer than 500,000 people unemployed? That Government went for growth, and that is the kind of policy he should be going for here, instead of calling for austerity for everybody else.

George Osborne: What I say is that the hon. Gentleman is betraying the spirit of Ernest Bevin, Hugh Dalton, Clement Attlee and the members of that Government, who came together after the second world war to build new international institutions to make sure that, in future, the world would come together to sort out its economic problems, instead of walking away from other countries, which is what we would be doing if we followed the hon. Gentleman’s advice.

Douglas Carswell: Last October, the Chancellor told this House that Britain would not be putting money into the bail-out fund, either directly or through the IMF. He said:
	“the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.”—[Official Report, 27 October 2011; Vol. 534, c. 471.]
	Has he changed his mind or was he playing with words?

George Osborne: I have not changed my mind at all. That is exactly what I said today; we are not contributing to the eurozone bail-out funds, including the European financial stabilisation mechanism, which was the thing that the previous Labour Government signed us up to. We are not part of those eurozone bail-out funds. We are not contributing money to the IMF that can be put into those bail-out funds—that is something we have also insisted on. And in the communiqué it is absolutely clear that the IMF is not allowed to create some special bail-out fund uniquely for the euro. This money goes into the general resources of the IMF to be used for countries, not for currencies.

Alison Seabeck: Could the Chancellor please explain to the House and to his largely absent Lib Dem coalition partners—I say that for the record—why the amount chosen for the IMF is, by some extraordinary coincidence, just below the level required for a parliamentary vote? He has bandied around the words "political opportunism", but is he not himself being a political opportunist?

George Osborne: I do not think that there is much political opportunism in having to take the difficult decision that Britain should contribute to IMF resources. I have taken that difficult decision, and I am happy to explain it to Parliament and to the public.

John Redwood: Given that I agree with the Chancellor that IMF money should not be used to bail out a currency, will he urge the IMF to make sure that loans are made available to European countries only when they are in a position to devalue or when they are withdrawing from the single currency? Otherwise, as with the sterling area, surely the responsibility rests with the governing authorities and the central bank of the euro to make the money, the loans, the subsidies available.

George Osborne: I do not agree with my right hon. Friend on this point, because if the IMF said it was never going to support a loan or undertake a programme with a eurozone country, it would, first, be walking away from one of the largest economic areas in the world. Secondly, all those eurozone countries would presumably then cease to be members of the IMF, because there would be no interest in it for them. So France, Germany and other countries would then withdraw from the IMF, and I do not think that that is what we want to see happen in the IMF. The IMF needs to support all countries that get into difficulty, provided the conditions are met and the rigour is applied to those programmes.

Kelvin Hopkins: The IMF was designed for a world of separate national currencies with exchange controls and properly managed national economies. Is it not time to look again at re-creating that sensible world, because it actually worked, starting with the re-creation of national currencies in Europe?

George Osborne: The hon. Gentleman has, for all the time I have been in the House, consistently argued against British membership of the euro and consistently raised questions about the viability of the euro. I completely respect him for that, but to say that the IMF cannot get involved in the eurozone’s problems would be just a remarkable abnegation of the IMF’s commitment to deal with the world’s economic problems. The eurozone is at the centre of the world’s current economic problems because those involved have not been able to convince the markets that they can deal with their debts in the way that we have been able to. So I do not think it would be sensible for the IMF to just say, “There is a very important part of the world, which is at the epicentre of the world’s economic problems, but we are not going to get involved there.”

Mark Field: I entirely support the Chancellor’s contention that the interests of the City of London and the UK’s financial
	services industry are best served by unequivocal backing for the IMF at this time. Will he now pledge that by the time of the Whitsun recess he will have come to this House to make a statement on the Government’s strategic policy towards our relationship with the eurozone?

George Osborne: I thank my hon. Friend for his support, which is very welcome. As the representative in this Parliament of Europe’s largest financial centre, he completely understands our huge national interest in a stable world economy and in institutions that can try to bring stability to that world. I will give thought to his suggestion of a statement on the broader eurozone problems and will come back to him.

Stewart Hosie: I thank the Chancellor for his statement and for allowing me early sight of it, and I agree with his welcome for the European Central Bank’s commencement of the long-term liquidity operation. There are concerns about the size of the firewall and, still, about the scale of support being offered by the ECB, but notwithstanding that and irrespective of the final balance of support to the euro from the ECB and to individual countries from the IMF, will he continue to agree that the best hope we all have for an export-led recovery is a strong, stable and growing eurozone economy with no threat to that currency?

George Osborne: I find myself in agreement with the hon. Gentleman who speaks for the Scottish National party. One of the consequences of what has happened over the past year or two in the eurozone is that countries that want to join the eurozone now need to ante-up a huge sum of money into the bail-out fund. No doubt that is something he will be explaining to Scottish voters as we discuss whether Scotland should ditch the pound and join the euro.

Angie Bray: I support the Chancellor’s decision to make this additional loan to the IMF because of the important work that the IMF does in stabilising the economy across the world, not just in the EU. Can he reassure my constituents in Ealing and Acton that the loan will be repaid with interest?

George Osborne: Yes, I can. IMF loans are repaid and they always have been in the past. No country has lost money giving resources to the IMF and such loans are repaid with interest. Indeed, if I can find the quotation—[ Interruption. ] It is worth waiting for, because it is from the shadow Chancellor. When the shadow Chancellor was in the Treasury, he said that IMF lending to
	“countries is invariably repaid with interest.”
	That is what he said in 2003. I can give my hon. Friend the assurance that loans to the IMF are made to the most creditworthy institution in the world and are repaid.

Geoffrey Robinson: Last summer, the Financial Secretary, I think, said that alongside a quota increase, contributions under the new agreement to borrow would be reduced. Can the Chancellor tell the House whether they have been?

George Osborne: The 2010 quota agreement has not come into effect because it has not been ratified by all the countries. Our bilateral loan will be made only once that quota deal has been ratified. I have listened to the hon. Gentleman for the 11 years for which I have been a Member of Parliament and I cannot believe that he really supports the decision being pursued by the shadow Chancellor. The hon. Gentleman knows from his time at the Treasury and from his broader experience that Britain has a vital interest in economic multilateralism and the institutions that support a more stable economy.

John Hemming: Does the Chancellor find it odd, as I do, that the Opposition were happy to commit the British taxpayer to the eurozone bail-out but will betray British workers who depend on exports for their jobs by not supporting the IMF?

George Osborne: To be fair, probably most Labour MPs, in their quieter moments, support the IMF and think it is perfectly sensible that, when other countries add their resources, Britain should do so. The most remarkable thing is that the shadow Chancellor led the Labour party into voting against the implementation of the London G20 deal. Because of the change of Government, we introduced the statutory instrument that gave effect to the London G20 deal, yet the shadow Chancellor led the Opposition against it.

Chris Bryant: Notwithstanding the mandate the Chancellor already has, would not our voters expect a separate vote on this loan in this House, so that all Members can take a view? The Leader of the House, who is sitting next to the Chancellor, is shaking his head; he knows perfectly well that he is going to prorogue Parliament a full week early. Members have plenty of time to stay here and vote on the matter. Is it not more important that we vote?

George Osborne: There have been two votes in this Parliament, in the past 18 months, on precisely the question of how much headroom the House of Commons gives the Chancellor of the day to make loans to the IMF. There have already been two votes.

David Ruffley: The Economist has rightly observed that the eurozone’s big problem is not a dearth of resources to the IMF, but the institutionalised paralysis of eurozone countries. Can the Chancellor tell the House what discussions he had at the spring meetings about the need for practical steps to break that paralysis?

George Osborne: My hon. Friend is completely right that providing additional resources to the IMF will not solve the eurozone’s problems, I said that in my statement. It is about making sure that the IMF is prepared for whatever is coming down the track—prepared for the worst, rather than just hoping for the best, and of course we do all hope that things improve. My hon. Friend is also right that the eurozone countries need to work more closely together in terms of the fiscal integration of their policies. That is one of the reasons why I did not want Britain to join the euro and would never want Britain to join the euro. The logic of a single currency is that devaluation is not possible and different inflation rates cannot be manufactured in different countries.
	The end result is the transfer of large sums of money from German taxpayers to Spanish taxpayers. That is their decision by being part of the currency; our decision is to make sure that the world is ready in case that does not come about.

Keith Vaz: One of the communiqués following the summit referred to the need to pursue solutions for malnutrition and food insecurity, as well as fragile states. I support the loan for those purposes, but how can we be sure that the money will end up supporting countries such as Yemen, which has just been through a presidential election and desperately needs support from the IMF and the World Bank?

George Osborne: The right hon. Gentleman is quite right to draw attention to the fact that, although we have been talking a lot about the eurozone, the IMF does a great deal of important work in low-income countries. As I said, there are 53 programmes, of which only three—albeit they are very large ones—are in the eurozone. At the IMF I specifically intervened to ask that the IMF’s windfall profits from recent gold sales be used to reduce the interest costs for low-income countries that undertake IMF programmes, to make sure that they have access to the increase in resources we are talking about today.

Peter Bone: The only way for Spain, Italy, Portugal and Greece to become competitive and get their economies growing again is through a return to national currencies. Does not the Chancellor agree that it is a bonkers policy to pour billions and billions of UK taxpayers’ money into supporting the failed euro?

George Osborne: We are not pouring money into some eurozone bail-out fund. We are providing a loan to the International Monetary Fund. I hear what my hon. Friend says about the decision, but every single previous Government have been part of increases in IMF resources—in 1983 and in 1990, under Lady Thatcher’s Government, we contributed to increases in IMF resources. He says that these countries are lost causes, but in Portugal, where very difficult decisions have been taken, exports are up by 7% and the current account deficit has been reduced; Ireland has gone into a current account surplus and Spanish exports are up. Of course they are having to make the adjustments in a brutal way, by real cuts in wages rather than a currency devaluation, but that is the consequence of being in a single currency. The Governments in those countries, with, in most cases, the support of the public now, are taking those difficult decisions. It is interesting that even in Greece, which is probably the most traumatically affected of those countries, there is a clear and overwhelming public majority for Greece staying in the euro.

Mike Gapes: The Chancellor claimed that the additional contribution that this country is making is proportionate to our shareholding. Can he explain why we are paying $15 billion, whereas France is paying $40 billion, Germany $55 billion and Japan $60 billion, and South Korea, with a smaller population and a smaller economy than ours, is paying the same as we are?

George Osborne: I am not sure if that is a request for more money to the IMF. As I made clear in the statement, the non-euro countries felt it was appropriate that the euro countries made a proportionately bigger contribution. That is why France, for example, has given $40 billion. In the past, because Britain has exactly the same quota shareholding as France, we would have given the same. We have not. Our $15 billion is almost exactly the same as the $15 billion loan made at the London G20 summit. I think it is proportionate to the eurozone effort. I cannot believe that the hon. Gentleman, as a former Chair of the Foreign Affairs Committee, really supports the shadow Chancellor’s position of opposing Britain being part of a global deal to increase IMF resources.

John Baron: I am sure the Chancellor will agree that until the core cause of the crisis is solved or at least approached—that being a lack of competitiveness—additional borrowing in a crisis caused by excessive borrowing already is simply reinforcing failure. Is the Chancellor at all concerned that for the 50 nations that he mentioned, devaluation was always an option—an option that has always been available to IMF rescue packages, but is not available to countries inside the eurozone?

George Osborne: My hon. Friend is right that countries in the eurozone do not have the option of devaluation if they want to remain in the eurozone. That is the logic of the single currency. That is why the Foreign Secretary, when he was leader of our party, said that it was
	“a burning building with no exits”.
	In that situation the question for Britain, rather than for members of the eurozone, is what do we do. What we can do is make sure that the global institutions that try to protect the world from instability, that try to provide shock absorbers for what happens in different countries, including in the eurozone, are well resourced to deal with whatever is thrown at them. I say to my hon. Friend and to Members across the House that it is possible to be very, very Eurosceptic and at the same time to be a believer in the international institutions that Britain helped to create 60 years ago.

Kevin Barron: Given the answer that the Chancellor gave to the right hon. Member for Wokingham (Mr Redwood), could he tell us exactly what was agreed this weekend that says that the IMF should give loans only to countries and not currencies?

George Osborne: The communiqué that was issued by the Finance Ministers and the European Central Bank governors said explicitly, with reference to the $430 billion that was provided by the countries at the meeting:
	“These resources will be available for the whole membership of the IMF, and not earmarked for any particular region.”

Mark Pritchard: But is not the IMF in danger of sleight of hand? On the one hand the IMF claims not to bail out currencies, yet on the other hand it offers bilateral loans to countries in the eurozone that are failing because of the eurozone currency. Is that not an indirect loan from the IMF?

George Osborne: I would say, first, that the reason why these countries have the problems that they do is often because of their domestic difficulties. Portugal has been fundamentally uncompetitive for a decade. Ireland had a massive banking system that collapsed. Italy and Spain have not done enough to keep up with the competitiveness of Germany. They are addressing domestic problems. That is made more difficult because they cannot devalue their currency, but that is not the origin of their problems.

Frank Roy: What happened to the reforms that were supposed to be linked to any extra funding for the IMF?

George Osborne: In 2010, there was an agreement to change the quota of the IMF to give the new emerging economies of the world, such as China, India and the like, a greater say at the IMF. The quota was reallocated to reflect the new economic weights in the world. That deal has not yet been ratified, but we as a country have ratified that deal. We are one of the countries that have ratified it. There remain some countries that have not. Our loan is available only when the quota deal has been ratified by the required majority of those countries.

Several hon. Members: rose —

Mr Speaker: Order. There is still extensive interest in the subject, which I am keen to accommodate, but if I am to do so, brevity is of the essence.

Julian Lewis: When one’s friends are trapped in a burning building, is not the kindest thing to do to lead them in the direction of the exits in an orderly way, rather than give them billions to stay exactly where they are?

George Osborne: I would say that it is to make sure that the fire brigade has enough water to deal with the problem.

Barry Gardiner: The IMF should be plan B, plan A should be the European Central Bank. Does the Chancellor not accept that until the ECB properly backs the euro, the only people who will welcome more money coming in through the IMF are the traders who are making much money by picking off the peripheral countries around Europe as they go from one to the other?

George Osborne: Since December, the ECB has provided €1 trillion in its long-term repo operation, so it has provided a lot of support, most of which has been used by some of the eurozone banks to stop them falling over. The ECB has taken action, but the Prime Minister, myself and other members of the Government have in public, as well as in private—but in public—over the last six months, urged the ECB to do more; urged that greater fiscal transfers take place. On many of those things the ECB has made a lot of progress since the autumn. There is a much bigger eurozone firewall. As I say, the ECB, which was not in the game at all last autumn, has now provided €1 trillion of liquidity, so it has made those contributions, and therefore the rest of the world, as well as the UK, thought it appropriate that we should make sure that the IMF is well resourced.

Jo Johnson: My right hon. Friend rightly says that a well funded IMF and a bigger eurozone bail-out fund cannot be the whole solution to the eurozone crisis. Does he believe now that the overriding priority must be steps towards debt mutualisation and the structural reforms to address the underlying competitiveness issues that are at the heart of the crisis?

George Osborne: I absolutely believe that eurozone countries need structural reforms. This country needs structural reforms. The things that we have proposed to Parliament on welfare, education, planning and the like, are all part of reforms to make our country more competitive. We have not been talking about our economy here, but we came into government with the highest budget deficit of the lot and some real competitiveness problems. On mutualised debt, over a year ago, I said that I thought that the logic led the eurozone towards euro bonds. I have put that on the record, but ultimately that is a decision for the eurozone.

Tom Clarke: The Chancellor is now in a position to tell us whether he intends to honour his commitment of 0.7% gross national income for overseas aid by 2013. When can we expect the legislation, which I understand is now sitting on the desk of the Secretary of State for International Development?

Mr Speaker: Order. I am sure that the Chancellor will relate the answer to the IMF, to which I feel sure the right hon. Gentleman was seeking indirectly, and without saying so, to relate the matter.

George Osborne: We are going to honour that 0.7%. That is in the aid budget. It is in the budget of the Department for International Development. We can talk about the merits of legislation, but we do not need a piece of legislation. The proof is whether the money is being provided, and this Government are providing the money. I for one am proud that we will be the first Government in British history to hit the 0.7% of international aid.

David Mowat: The Chancellor has confirmed to the House that interest on this loan is payable in full. For the avoidance of doubt, will he confirm that the rate of interest that is payable is higher than the rate at which we will have to borrow?

George Osborne: The rate of interest would be set at the time the IMF called upon the loan, if it were to do so. It is only a contingent loan that will be available if the IMF needs it. The mechanism for setting the rate of interest for the IMF is well known. As I have said, countries do not lose money when they lend to the IMF—that is certainly Britain’s experience and that of other countries. Thanks to the actions the Government have taken, we are borrowing money at what is pretty much the lowest rate that anyone doing my job has ever borrowed money.

Stephen McCabe: If the rich EU countries that created the euro will not accept the risks associated with it, what is the moral case for saying that Britain and a host of other poorer countries should bail it out?

George Osborne: As I have explained, we are providing resources to the IMF. It was the previous Government, of whom the hon. Gentleman was a member, who committed the British taxpayer to the eurozone bail-out funds, which we had to get this country out of. I will take comments from my colleagues on the problems with the euro, but it is a bit rich coming from loyal Labour Members who supported Labour’s official policy of taking Britain into the euro.

Julian Brazier: I support my right hon. Friend’s commitment to that great institution, the IMF, and share his concern about what is happening to our largest export partner, but may I urge him to use the powerful position we have in the IMF, which is underpinned by this latest money, to ensure that there is a realistic examination of whether it is possible to save the southern European members without devaluation?

George Osborne: I welcome my hon. Friend’s support for this decision. IMF programmes should be very rigorous and there should be plenty of conditionality. As I have said, it is possible to undertake very difficult internal devaluations, as opposed to external devaluations—that is a consequence of remaining in a currency zone—and the IMF will help those countries through that.

Robert Flello: If in the weeks ahead the IMF announces, to everyone’s utter astonishment, that it wants to use some of that general fund for the eurozone bail-out pot, will the Chancellor bring the matter back to the House and allow us to vote on it?

George Osborne: I can be very clear that the British Government would not allow the loan we are talking about—the loan from Britain—to be used for the eurozone bail-out fund. It is for specific countries, not currencies, as set out in the communiqué.

Penny Mordaunt: What my constituents want to know is whether their money will be safe. Is the Chancellor aware of any instance of a country that has lent money to the IMF not being repaid in full?

George Osborne: No, there are no such instances. Every single country that has lent money to the IMF has got its money back.

Ian Davidson: First, will the Chancellor withdraw the outrageous slur that all Labour Back Benchers were in favour of Britain joining the euro? Secondly, surely his distinction between currencies and countries is mere sophistry. The reality is that this is about bailing out countries whose difficulties have been caused, or at least exacerbated, by being in the euro. When does he expect to have to bail out the eurozone again? When will the eurozone’s next request for money come?

George Osborne: I talked about loyal Labour Back Benchers and would never apply such an outrageous slur to the hon. Gentleman, whereas it is certainly applicable to the hon. Member for Birmingham, Selly Oak (Steve McCabe). The distinction is not sophistry, because an IMF contribution, were there ever to be one, to a
	eurozone bail-out fund, would basically put that money into a eurozone pot and then the eurozone would decide how it was spent. If there is a country programme for a specific country in the eurozone, the IMF team would turn up, wherever it happens to be, impose its own conditions and do its own analysis, and that is fundamentally different. The logic of the hon. Gentleman’s question is that the IMF would never help a eurozone country, which would lead to the eurozone countries leaving the IMF, and we would then be fundamentally undermining one of the most important institutions the world has seen in the past 60 years.

David Nuttall: Is it not the case that every time the IMF provides any assistance to a eurozone country, it simply demonstrates the complete failure of the European Central Bank to do its job properly?

George Osborne: The European Central Bank is of course a very important part of the equation, but one of the problems facing Ireland, Portugal and, indeed, Greece was that they were also shut out of international debt markets, and when countries are shut out of international debt markets they usually—almost always—turn to the IMF for assistance, so it would be very odd if the IMF were not there to help them.

Jim Cunningham: I am glad that the Chancellor has realised—it has taken him four years to do so—that there was a world economic crisis which started outside this country. Yes, Labour in government in the past has supported the IMF, and we still do, as we know that we have to do something to help Europe, but, following what my hon. Friend the Member for Bolsover (Mr Skinner) said, I must ask why are the British people paying for it through one of the most punitive Budgets ever levied? On the one hand they understand that we have to help Europe, but on the other we have one of the most punitive Budgets that has ever been levied on the British people.

George Osborne: I have never denied that there was an international economic crisis; what I said was that those problems were not visited upon Britain from abroad. Britain was at the epicentre of the crisis, with the biggest bank bail-outs, the most indebted households, the most over-leveraged banks and one of the largest deficits going into the crisis. That is what I complain about, and I complain in particular about the man who was responsible for most of those economic policies giving us lectures on them afterwards. I welcome the fact that the hon. Member for Coventry South (Mr Cunningham) supports the IMF and an increase in its resources, but the money does not come out of the public spending cuts that we have had to make in order to deal with that mess; it comes out of our foreign exchange reserves. We are exchanging one asset for another, and as I have said, every country that has lent money to the IMF has got its money back.

Jason McCartney: Happy St George’s day, Mr Speaker.
	I very much welcome the fact that the loan will be returned with interest, but does my right hon. Friend
	hope, as I do, that those interest payments are not returned at the expense of countries such as Greece racking up yet more debt?

George Osborne: IMF loans are made with conditions, and one condition is interest, although there is a specific programme to help very low-income countries to cope with the interest costs. It is very important, as part of any IMF analysis, that we undertake proper debt analysis, and the IMF has been pretty instrumental in driving through the private sector creditor write-offs that have happened in Greece in order to improve debt sustainability, something which—I do not think it is any secret—many eurozone countries were not particularly in favour of. The IMF can therefore take action to improve debt sustainability.

Fiona O'Donnell: The Chancellor has told the House that this is not about a eurozone bail-out, but back in September he also told us that we would not contribute again to the IMF bailing out the eurozone. If that is the case, why are eurozone countries contributing proportionately more?

George Osborne: I said very clearly in my statement that the principal reason the world economy is unstable is the problems in the eurozone, and, as all the questions have demonstrated, there is of course a connection between those problems and the need to have a well resourced IMF, but, as I said last autumn, we are not prepared to see IMF resource going into eurozone bail-out funds. It needs to be for individual countries and for individual country programmes, and that is a view which not just I or Britain happens to have, but which Japan, South Korea, Australia and European countries that are not in the European Union, such as Norway and Switzerland, share. Ask yourself the question, Mr Speaker, and the House can ask itself, too: why have all those other countries thought it is in their interests to help to deal with a problem that is actually on Britain’s doorstep as well?

Matthew Hancock: What would the Chancellor say to the exporters of west Suffolk about the purpose of the loan, when they need expanding markets in Europe and across the world?

George Osborne: The exporters of west Suffolk, like people in every other part of the country, have an enormous interest in there being greater stability in the eurozone and in the world economy. What has been so damaging in the past six months has been the flight of confidence from those countries, and its impact on exporters in Britain and elsewhere in the world. We want confidence to return. As I said in the statement, there was a sense in the spring meetings that things were a little better than before Christmas. However, the risks are real and they remain.

Grahame Morris: In his statement, the Chancellor told the House that the £10 billion contribution to the IMF would not affect spending by UK Departments. Why, therefore, is the Chief Secretary reported to be asking Departments to identify £16 billion more in savings to pay for “unforeseen” events? Is that for a eurozone bail-out contingency fund?

George Osborne: No it is not, and there is no connection between the two matters. An IMF loan comes out of our foreign exchange reserves. That has been the case under Labour Governments, Conservative Governments and this coalition Government. It is a contingent loan that will be drawn upon if the IMF needs resources. We swap our foreign exchange asset for the IMF loan. The Chief Secretary said what he did today because we are trying to get a grip on the public finances. To do that, we have to ensure that Departments can deal with their own contingencies, as and when they arrive.

Stewart Jackson: We all know that what we are discussing is state-sponsored money laundering to prop up the failed and doomed European project called the euro. The deal does not come without a heavy human cost. In southern Europe, it means the imposition of a net tightening of 3% per year, yet there is no monetary stimulus to offset that, no demand for growth in the rest of Europe and no demand for structural reforms. Why is the Chancellor throwing the good money of UK taxpayers after bad for this economic madness?

George Osborne: This money comes out of Britain’s foreign exchange reserves and is swapped for an IMF loan. It is therefore not money that we would otherwise spend on public services or use to cut taxes. My hon. Friend is being a little unfair to the countries that are having to undertake difficult structural reforms. For example, Spain has recently passed significant reforms to its labour laws to make its employment market more flexible and Italy has made difficult pension reforms. People will remember the scenes in Italy when those reforms were announced a few months ago. Britain is also having to make difficult reforms and take difficult decisions to make our economy more competitive and to deal with the problems in our public finances.

Nadhim Zahawi: The Australian Government made their decision with the backing of the Opposition. Will the Chancellor confirm that his decision will not be affected by the shadow Chancellor’s flip-flopping?

George Osborne: There is not much danger of my being influenced by the shadow Chancellor’s flip-flopping. My hon. Friend draws to our attention the interesting point that the Australian Liberal party, which is hardly the most Europhile party in the world, understands that Australia has obligations to the international community and to the IMF. Given that Australia is prepared to make a contribution, it would be quite odd if Britain was not.

Chris Heaton-Harris: May I congratulate the shadow Chancellor on his epic exploits yesterday? I note that he kept on message by going neither too far, nor too fast.
	I voted for the loan and believe that it would have been bizarre had the Chancellor not offered a loan of the level agreed to by Parliament. Will my right hon. Friend guarantee that he will come back to this place and ask for Parliament’s assent should more funds be asked for?

George Osborne: I can do that on the simple grounds that I would not be able to make a loan beyond the agreed headroom without a vote in Parliament. Perhaps by then the shadow Chancellor will have flip-flopped again and will support it. [ Interruption. ] I shall be very generous and congratulate the shadow Chancellor on completing the marathon and raising all that money. I advise him not to wear flip-flops when he runs.

Anne Main: May I ask for clarification of the terms of the loan? The Chancellor referred in his statement to $15 billion and under £10 million, but the currency being utilised is special drawing rights at £1 to the special drawing right. Should the currency fluctuate and push the loan over £10 billion, will the Chancellor come back to Parliament and give us a vote on it?

George Osborne: The parliamentary authorisation is expressed in special drawing rights, and on the exchange rate at the moment the loan is just less than £9 billion.

Richard Harrington: I realise that mind reading is not among my right hon. Friend the Chancellor’s talents, but does he think that as the shadow Chancellor did his gallant marathon yesterday, he suddenly had a Saul-on-the-road-to-Damascus moment and thought, “Ah, the organisation that I have supported for so long, the IMF, now has enough money, so I don’t agree with increasing its resources”, or does my right hon. Friend think, as I do, that the shadow Chancellor’s act is one of blatant, naked political opportunism that should be condemned?

George Osborne: I do think it is an act of political opportunism. As I have said, there was complete astonishment at the IMF when I said that the Opposition would probably oppose what I was doing. The people there all know the shadow Chancellor, because he negotiated on behalf of the Treasury as Britain’s representative at the IMF, so they find his decision very difficult to understand.

Mark Spencer: Although I support the funding of the IMF, will the Chancellor confirm that it simply emphasises the importance of maintaining UK financial credibility for UK interest rates and jobs in small businesses?

George Osborne: I thank my hon. Friend for his support. He is absolutely right, and while I was sitting in the IMF meeting on Friday and on Saturday morning, my mind wandered to thinking about what would have happened if I had turned up and said that we were abandoning our fiscal consolidation plan. I came to the conclusion that we would have been the subject of the meeting’s discussion rather than the problems in the eurozone.

Therese Coffey: Will my right hon. Friend confirm that not a single penny is being added to either our national debt or our deficit as a result of this action?

George Osborne: Yes, I can confirm for my hon. Friend’s constituents in Suffolk and for people around the country that an IMF loan does not add to the debt or the deficit.
	We have to ask ourselves why, when people analyse the British economy, they do not add an IMF loan to the debt or deficit. It is because they understand that it is a loan that is paid back with interest and an asset that is exchanged for some of our foreign exchange reserves, not a call on public spending.

George Eustice: I support the Chancellor’s decision, because Britain should play its part in supporting the IMF and helping to stabilise the world economy. I particularly welcome what he said about supporting countries rather than currencies, but what advice should the IMF give to a country that applies for support but whose problems are largely caused by an unsustainably high exchange rate?

George Osborne: I thank my hon. Friend for his support, which is very welcome. The problems of the countries that we are talking about lie in their lack of competitiveness, or in the case of Ireland in its banking system. The problems that they are trying to deal with have been exacerbated by the fact that they are part of a currency union and cannot devalue, although without getting into a lengthy debate I have to say that exit from the single currency would also bring them a whole set of problems. We are very clear that an IMF programme would come with robust conditions, real analysis of debt sustainability and real recommendations on structural reforms to make those economies more competitive.

Conor Burns: Does my hon. Friend remember the warnings that many gave prior to the creation of the euro that without large regional subventions, the project would fail? Although he is correct in asserting that “I told you so” is not a policy, it is, sadly, increasingly a fact. He has acknowledged that Germany is doing more, but does he agree that it needs to do still more before eurozone countries have recourse to the IMF?

George Osborne: I certainly agree that Germany and other countries need to live with the consequences of the euro, and the German taxpayer is now having to provide many hundreds of billions of euros to various funds.
	My hon. Friend is right that many Conservative Members warned of the consequences of Britain joining the euro. I remember helping the then Leader of the Opposition write a speech that he delivered at Fontainebleau, which was immediately parodied by the then Government, led by Tony Blair, and the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), as deeply irresponsible. The then Conservative leader spelled out in that speech a lot of the consequences that have come to pass.

Christopher Pincher: Harold Wilson famously said that a week is a long time in politics, so does my right hon. Friend agree, having seen the shadow Chancellor’s performance—he first supported decent funding for the IMF and then quickly appeared to criticise it—that it now appears that Labour’s Treasury team’s dictum is that a minute is a long time in politics?

George Osborne: Unfortunately, the shadow Chancellor has not, in the 18 months that he has been doing that job, set out any kind of consistent and
	principle-based opposition to the Government. It is all over the place, and has ended up with the Labour party voting against an increase in IMF resources. If we asked people for one of the achievements of the three-year Brown Government, they would probably say, “The London G20 summit was about the only one,” and that was all about increasing IMF resources. The position that the shadow Chancellor has led the Labour into is a remarkable one.

James Morris: My constituents have legitimate concerns whenever large amounts of money are placed in international institutions. Will the Chancellor therefore confirm that the money Britain has loaned to the IMF can be used globally and not necessarily in the eurozone, and that the IMF will use its normal, stringent mechanisms for ensuring that the money is spent wisely?

George Osborne: I can tell my hon. Friend that his west midlands constituents will not have to pay any more taxes for the loan and will see no cuts in public services as a result of it. The money comes out of the foreign exchange reserves—the foreign currencies that Britain holds and always has held. I would also say to the people of the west midlands and elsewhere that the money is available for all countries in the world that get themselves into difficulties. They have to meet certain conditions—very tough conditions—before they get access to the money, but if the world did not have a global institution such as the IMF, we would be in a much worse place. All the manufacturers and exporters in the west midlands understand that problems in the world economy and our export markets come back to bite us very quickly indeed.

Guy Opperman: Businesses in the north-east want a secure, worldwide support system for the global economy and welcome this decision on the IMF, but the man in the street in Newcastle and Hexham wants to know whether we have ever failed to get our money back from the IMF.

George Osborne: No we have not failed to get our money back from the IMF. Britain was one of the creators of the IMF, because we understood after the 1930s that if countries just walk away from problems in the world economy, the problem is very much worse. In the north-east, we have manufacturers such as Nissan in Sunderland. Nissan is making a big new investment in the UK. It is doing so, in the end, because it has faith that the world economy will be a more stable place, one of the reasons being that we have strong institutions such as the IMF.

Charlie Elphicke: Had other IMF quota members followed the advice of the shadow Chancellor and effectively walked on by, leaving European countries to fend for themselves, what would have been the effect on the UK economy in terms of jobs and money, and what would have been the effect on the economies of developing countries?

George Osborne: If the world were unable to provide the IMF with the resources it needed, people would see that the world was not able to act as a whole to deal with world problems. By the way, I happen to believe that there is no prospect that the shadow Chancellor would
	have taken a different decision from the one I have taken if he were doing my job. He takes the position he does simply because he is sitting on the Opposition Benches.

Bob Stewart: I will repeat almost exactly what my right hon. Friend just said. Can he envisage any Chancellor of any party not making a decision such as the one he made this weekend for contingency funding to help out the IMF?

George Osborne: I do not think that any Chancellor since the creation of the IMF would have taken a different decision. In the end, all parties—at least, until today—have recognised that the IMF is an incredibly important institution for the stability of the global economy. If was created under a Labour Government, and it would be pretty remarkable if a Labour Chancellor were to try to pull the plug on Britain’s participation in it.

Robert Halfon: Will my right hon. Friend assure my constituents that there will be no impact on the increased spending on our schools and hospitals that the coalition Government are providing, and no impact on cutting taxes for more than 40,000 Harlow residents through raising the income tax threshold?

George Osborne: I can absolutely assure the people of Harlow that we will deliver a big increase in their personal tax-free allowance, continue with real increases in the health service, support their schools and, above all, get their economy moving after the disastrous mess that the previous Labour Government put us in.

Dawn Primarolo: I thank the Chancellor and the 58 Members who were able to participate in this important statement.

Points of Order

Kerry McCarthy: On a point of order, Madam Deputy Speaker. Last week I tabled a question to the Minister for Women and Equalities asking what representations she had made to the Chancellor of the Exchequer about an equality impact assessment for the Budget. That question appeared fleetingly at No. 2 on the Order Paper for Thursday’s oral questions and then disappeared. Although I had asked her what she had said to him, she obviously thought it more in keeping with the ethos of her Department that she let him answer on her behalf. May we have some guidance on which questions are likely to be transferred so that we do not waste our opportunity at oral questions by asking things that the Minister does not feel capable of responding to?

Dawn Primarolo: As the hon. Lady will know, the transfer of questions is dealt with by the Departments and is not a matter for the Chair. I would suggest, however, that she has a conversation with the Table Office to ensure that, next time she tables a question, it is to be answered by the Department she intended.

Clive Efford: On a point of order, Madam Deputy Speaker. At the beginning of last month, new evidence came forward calling into question the conclusion of the Macpherson inquiry about whether police corruption interfered with the investigation into the murder of Stephen Lawrence. I tabled questions on that basis to the Home Office, and on 19 March I received a holding answer saying that it would answer as soon as possible. I subsequently retabled those questions asking when they would be answered and today received another holding answer saying that the Department would answer as soon as possible. This morning, in The Guardian and The Daily Telegraph, there is front-page speculation about the Home Office’s position on an inquiry into these matters. I have not received any decent response to questions I have tabled in the House. Is it not an affront to the House that speculation clearly fostered by the Home Office should appear in the media after a Member has raised the issue in the House? Furthermore, Madam Deputy Speaker, have you had any indication from Home Office Ministers that they are likely to come here and explain this completely unsatisfactory situation?

Dawn Primarolo: The hon. Gentleman has closely followed these important issues for some time because of their relevance to his constituency. He asked two specific questions. The first question was about adequate answers from Departments to Members. If he is dissatisfied, it is open to him to pursue it through the Procedure Committee; it is not a matter for the Chair. His second question was about notification of a statement from the Home Office on this important issue. I have received no notification and have no knowledge of such a statement, but the Deputy Leader of the House is in his place and knows that this is an important issue, and I am sure that he is prepared to assist the hon. Gentleman in any way he can to ensure that this matter is dealt with properly and urgently.
	I understand that owing to an error in the notice given on the Order Paper, Mr Graham Jones will not be presenting his Bill today.

Financial Services Bill (Programme) (No. 3)

Motion made, and Question proposed,
	That the Order of 6 February 2012 (Financial Services Bill (Programme)), as varied by the Order of 21 February 2012 (Financial Services Bill (Programme) (No. 2)) be further varied as follows:
	1. Paragraphs 4 and 5 of the Order shall be omitted.
	2. Proceedings on Consideration and Third Reading shall be completed in two days.
	3. Proceedings on Consideration shall be taken on the days shown in the first column of the following Table and in the order so shown.
	4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.
	
		
			 TABLE 
			 Proceedings Time for conclusion of proceedings 
			 First day 
			 New Clauses and New Schedules; amendments to Clauses 1 to 3; amendments to Schedule 1; amendments to Clause 4; amendments to Schedule 2; amendments to Clause 5; amendments to Schedule 3 10.00 pm 
			 Second day 
			 Remaining proceedings on Consideration Three hours after commencement of proceedings on Consideration on the second day. 
		
	
	5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion four hours after the commencement of proceedings on consideration on the second day.—(Mr  Hoban .)

Christopher Leslie: I am surprised that the Minister has moved the programme motion formally, given that today—day one of what is supposedly two days for Report and the remaining stages of this Bill—we have five hours of debate in which to cover 59 amendments. Even if there are no Divisions in the House, that leaves barely five minutes for each item.
	This Bill is an extremely important piece of legislation. It reforms some of the most important financial institutions in this country, including the Bank of England, creating new financial regulators and dealing with consumer finance, business finance and all those key issues. It has 103 clauses and 21 schedules, yet this programme motion gives us a derisory amount of time. We supposedly have two days, but we will in fact have one and a half days on Report. The second day is not a full day, but a half day, with three hours for the remaining proceedings. Do not let us forget that today we have five clauses to cover in the space of five hours, and we will have 97 clauses to consider in three hours on day two, whenever that is scheduled. That is barely even paying lip service to proper scrutiny. When the Bill gets to the other place, their noble Lords will have to look seriously at whether there has been proper accountability for the provisions that are before us.
	We also had insufficient time upstairs in Committee, where 20 clauses went undebated. That is because the Government have consistently allocated insufficient time for this legislation. When the previous Administration took the Financial Services and Markets Act 2000 through the House in 1999-2000, 35 sittings were given in Committee. However, less than half that number were given to scrutinise this Bill in Committee upstairs—we had only 16 sittings in total—so it is no wonder that clauses went undebated.
	This is a parody of a programme motion. It leaves massively insufficient time. I do not wish to waste any more of it, but this motion has to be opposed. I hope that my hon. Friends will join me in protesting against this lack of accountability, call on their noble Lords to spend more time scrutinising the Bill properly and vote against this programme motion.

Mark Hoban: The hon. Member for Nottingham East (Chris Leslie) protests too much about this matter. Those of us who are veterans of the Bill and those who occasionally came to watch our proceedings will know why 20 clauses went undebated, as is clear from the Committee Hansard. The Opposition agreed on the programme motion and the number of sittings—there was no Division on the programme motion after Second Reading—and ample time was given. However, on one occasion the hon. Gentleman spent an hour debating a set of minor and technical amendments, during which he discussed the correct terminology for people from Gibraltar and whether any Committee members had ever had the pleasure of visiting Gibraltar, questioned the drafting conventions relating to the insertion of amendments into a lettered list, and speculated as to the bedtime of my officials. He did not strike me as a man who was keen to press forward with scrutiny of the Bill.
	This Bill has received proper scrutiny. It has been discussed by the Treasury Committee—we have a number of its reports before us today, which will enable us to discuss the issue—and has received pre-legislative scrutiny by a Joint Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). We listened carefully to the arguments made by both Committees, which have been reflected in the Bill that we have debated. I believe that there was adequate time in Committee to deal with the matter. The fact that we ran out of time was not down to the way in which the Bill was debated by the Government; it was down to the way in which the Opposition handled it.
	It is also the case, as my hon. Friend the Deputy Leader of the House has said, that in the last Session of the previous Government, no Bill was given more than one day on Report. Having a two-day Report Stage is important, as this Bill requires scrutiny, and I believe that a great deal of scrutiny is taking place. It is now time for us to get on with the debate, and I am sorry that the hon. Gentleman is seeking to divide the House on the motion, because the time spent on the Division could be spent discussing the Bill and getting our points across.
	Question  put .
	The House divided:

Ayes 277, Noes 183.

Question accordingly agreed to.

Financial Services Bill
	 — 
	[1st Allocated Day]

Consideration of Bill, as amended in the Public Bill Committee

New Clause 4
	 — 
	Power to make further provision about regulation of consumer credit

‘(1) Subsection (2) applies on or at any time after the making after the passing of this Act of an order under section 22 of FSMA 2000 which has the effect that an activity (a “transferred activity”)—
	(a) ceases to be an activity in respect of which a licence under section 21 of CCA 1974 is required or would be required but for the exemption conferred by subsection (2), (3) or (4) of that section or paragraph 15(3) of Schedule 3 to FSMA 2000, and
	(b) becomes a regulated activity for the purposes of FSMA 2000.
	(2) The Treasury may by order do any one or more of the following—
	(a) transfer to the FCA functions of the OFT under any provision of CCA 1974 that remains in force;
	(b) provide that any specified provision of FSMA 2000 which relates to the powers or duties of the FCA in connection with the failure of any person to comply with a requirement imposed by or under FSMA 2000 is to apply, subject to any specified modifications, in connection with the failure of any person to comply with a requirement imposed by or under a specified provision of CCA 1974;
	(c) require the FCA to issue a statement of policy in relation to the exercise of powers conferred on it by virtue of paragraph (b);
	(d) in connection with provision made by virtue of paragraph (b), provide that failure to comply with a specified provision of CCA 1974 no longer constitutes an offence or that a person may not be convicted of an offence under a specified provision of CCA 1974 in respect of an act or omission in a case where the FCA has exercised specified powers in relation to that person in respect of that act or omission;
	(e) provide for the transfer to the Treasury of any functions under CCA 1974 previously exercisable by the Secretary of State;
	(f) provide that functions of the Secretary of State under CCA 1974 are exercisable concurrently with the Treasury;
	(g) enable local weights and measures authorities to institute proceedings in England and Wales for a relevant offence;
	(h) provide that references in a specified enactment to the FCA’s functions under FSMA 2000 include references to its functions resulting from any order under this section.
	(3) In subsection (2)(g) “relevant offence” means an offence under FSMA 2000 committed in relation to an activity that is a regulated activity for the purposes of that Act by virtue of—
	(a) an order made under section 22(1) of that Act in relation to an investment of a kind falling within paragraph 23 or 23B of Schedule 2 to that Act, or
	(b) an order made under section 22(1A) of that Act.
	(4) On or at any time after the making of an order under section 22 of FSMA 2000 of the kind mentioned in subsection (1), the Treasury may, if in their opinion it is desirable to do so having regard to the FCA’s operational objectives (as defined in section 1B(3) of FSMA 2000) by order—
	(a) exclude the application of any provision of CCA 1974 in relation to a transferred activity, or
	(b) repeal any provision of CCA 1974 which relates to a transferred activity.
	(5) The additional powers conferred by section 95(2) on a person making an order under this Act include power for the Treasury, when making an order under this section—
	(a) to make such consequential provision as the Treasury consider appropriate,
	(b) to amend any enactment, including any provision of, or made under, this Act.
	(6) The provisions of this section do not limit—
	(a) the powers conferred by section98 or by section 22 of FSMA 2000, or
	(b) the powers exercisable under Schedule21 in connection with the transfer of functions from the OFT.
	(7) In this section—
	“CCA 1974” means the Consumer Credit Act 1974;
	“the OFT” means the Office of Fair Trading.’.— (Mr Hoban.)
	Brought up, and read the First time.

Mark Hoban: I beg to move, That the clause be read a Second time.

Dawn Primarolo: With this it will be convenient to discuss the following:
	New clause 5—Amendments to Tribunals, Courts and Enforcement Act 2007
	‘(1) Section 124 of the Tribunals, Courts and Enforcement Act 2007 (charges by operator of approved scheme) is amended as follows.
	(2) In subsection (1) for “costs’ substitute “charges”.
	(3) In subsection (2)—
	(a) for “costs”, in the first instance, substitute “charges”,
	(b) after “scheme”, insert “along with any charges made by the operator”, and
	(c) after “those costs” insert “and charges”.’.
	New clause 9—Debt management plan regulation
	‘The FCA shall bring forward recommendations within a year of the commencement of this Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.’.
	New clause 10—Mortgage rate forewarning
	‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.
	New clause 12—Prepayment schemes
	‘(1) The FPC must carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.
	(2) The FPC must make recommendations under subsection (1) within one year of this section coming into force;
	(3) Any report produced by the FPC under subsection (1) shall include an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets of the company operating such schemes in the event of insolvency.’.
	Government amendments 2 and 3.
	Amendment 37,page37,line42, in clause 5, at end insert ‘and targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.’.
	Amendment 55,page38,line6, at end add—
	‘(h) supporting the provision of legal advice on all areas of law related to personal debt, including but not limited to—
	(i) issues covered under Schedule 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012,
	(ii) remedies under the Insolvency Act 1986 and Tribunals, Courts and Enforcement Act 2007,
	(iii) protections under the Consumer Credit Act 1974 and Consumer Credit Act 2006,
	(iv) consumer redress schemes under the Financial Services and Markets Act 2000,
	(v) debt limitation under the Limitation Act 1980, and
	(vi) enforcement action for specified debts pursuant to a county court judgement, a High Court writ or warrant issued by a Magistrates’ Court.
	(4A) For the purposes of subparagraphs (h)(i) to (vi) above the consumer financial education body may enter into arrangements with the Ministry of Justice to direct appropriate levels of funding for these purposes.’.
	Government amendment 4.
	Amendment 40,page80,line2, in clause 22, at end insert—
	‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.
	Government amendments 11 and 18 to 21.

Mark Hoban: New clause 4, which is the most significant of the Government new clauses and amendments in the group, provides a framework for implementation of the Government’s proposal to retain the important rights and protections of the Consumer Credit Act 1974 to ensure that consumers do not lose out as a result of the transfer. For example, we are likely to retain section 75 of the Act, which provides for the joint liability of creditors for misrepresentation or breaches by suppliers.
	The Government’s preferred approach to the implementation of the transfer of responsibility for consumer credit from the Office of Fair Trading to the Financial Conduct Authority is to ensure that the Consumer Credit Act protections are replicated in the FCA’s consumer credit rule book, and that the relevant sections of the Act are repealed. That approach is in line with the intention to move to a more responsive, rules-based regime than the current statutory framework.
	However, there are limitations to the type of rules that the FCA can make, which means that it will not be able to replicate in its rules all the CCA protections that we want to retain, including protections that impose rights directly on consumers and those that affect unauthorised third parties. That means that some CCA protections will need to be kept in the CCA itself, and that certain provisions of the CCA will therefore need to remain in force following the transfer. As a result, a number of changes will need to be made to both the CCA and the FSMA as part of the transition, to reflect the fact that the FCA will be responsible for regulating consumer credit and to ensure that the FCA, as well as local trading standards, can effectively enforce the retained CCA provisions. For example, it will be necessary to replace references in the Consumer Credit Act to the Office of Fair Trading with references to the FCA. We
	will also need to apply certain features of the FSMA, such as references to the FCA’s objectives, statutory immunity and fee-raising powers, to the FCA’s new functions under the Consumer Credit Act, and enable the FCA to use FSMA supervision and enforcement powers that would normally be used in relation to breaches of FCA rules for breaches of CCA requirements. New clause 4 enables the Treasury to make those changes and other necessary amendments to the CCA and the FSMA by order.
	I should also draw attention to the addendum to the delegated powers memorandum, which the Department has prepared and provided to the delegated powers Committee. The memorandum sets out in more detail how this power is intended to operate and why it is necessary. Copies are available in both the Printed Paper Office and the Vote Office. The order to be made under this provision will be subject to further consultation following Royal Assent to the Bill. Government amendment 11 provides that any order under new clause 4 will be subject to the affirmative procedure and so can be made only with prior approval of both this House and the other place.
	Government amendment 2 supports effective collaboration between the FCA and local trading standards following the transfer, enabling the FCA to contract trading standards for the provision of services in the same way that the OFT does now—for example, to undertake local inspections and follow up on enforcement action, including by local illegal money-lending teams. Government amendment 21, and related amendments 18, 19 and 20, insert into the Bill provision for the transfer of the OFT property, rights and liabilities, including staff, to the FCA.
	I hope Members will agree that the Government amendments in relation to consumer credit are sensible and practical provisions to support an effective transfer of regulation to the FCA. The new clause and related amendments sit within a process of regulatory reform that seeks to tackle some of the issues raised by Members on both sides of the House about the functioning of the credit market. We believe the FCA will have much stronger powers and greater resources than the OFT has had in order to tackle detrimental practices in the consumer credit market. Unlike the OFT, the FCA will be able to make binding rules on firms to ban specific products or product features that cause harm, to issue unlimited fines, and to require firms to pay redress when things go wrong. It will also be able to apply greater scrutiny to applications for credit licences and make it more difficult for rogue firms to enter the market.
	As a consequence of the transfer we have introduced into the Bill, there will be a fundamental change in the regulation of firms such as payday lenders and debt management companies. I am pleased that the provisions enabling that transfer were welcomed in Committee.
	There are a number of Opposition amendments relating to consumer credit and debt management plans, and I want to say a few words about them now. On new clauses 5 and 9, I made it clear in Committee that I sympathise with concerns about some of the practices in the fee-charging debt management sector. That is why clause 6 enables the regulation of debt management
	companies to be transferred to the FCA. That is also why we have chosen to leave on the statute book the enabling powers of the Tribunals, Courts and Enforcement Act 2007.
	More immediately, we are working with the industry to develop a protocol of best practice for debt management plans, which should cover, among other things, the nature and timing of fees. Indeed, on 14 June the Minister with responsibility for consumer affairs, my hon. Friend the Member for North Norfolk (Norman Lamb), will chair the first industry-wide meeting to discuss and take forward the protocol. That will follow several months of meetings with a smaller, representative group of stakeholders, which has talked through processes, commercial terms and advice, to reach an agreed position.
	I also wish to refer the House to new guidance for the debt management sector recently published by the Office of Fair Trading, which sets out in substantial detail the standards expected of firms. I believe that it is appropriate that we give time and focus to current efforts to improve standards in the debt management sector, and take account of the significant changes to the wider regulatory regime enabled by the Bill, before we start talking about changes to a potential statutory scheme under new clause 5.
	As I said in Committee, I do not think that we should throw the baby out with the bath water and shut down the market for fee-charging debt management services, as proposed by new clause 9, before fully exploring better regulation. Where suppliers of credit are aware of people who are suffering financial distress in repaying their debt, I encourage them to signpost their customers to fee-free debt advice services so that they can get the best possible advice to meet their needs.
	On amendment 40 and new clause 10, I wish to reassure hon. Members that the Bill already enables the FCA to make the kind of rules proposed in those two provisions. Indeed, in relation to new clause 10, the Financial Services Authority already places a number of requirements on firms to ensure that borrowers are informed if their mortgage repayments are subject to change. I know that some hon. Members may wish to challenge the approach, saying, “But if the FCA can already make the proposed rules, what is the harm in accepting these proposals?” The point is that there are significant risks to specifying in great detail in the Bill the precise type of rules that the FCA may make. First, in doing so, we risk distracting the regulator from using its expertise and judgment to identify and address the risks that it considers pose the greatest risks to its objectives. As parliamentarians, we should be creating a framework within which technical experts can exercise their discretion, in a suitably constrained way. We should leave them to get on with the job, not provide a long laundry list of everything that we want them to do.
	By specifying in detail what rules should or should not cover, we also risk creating the opportunity for challenge to the regulator’s ability to make rules that are not specified in the Bill. The lack of specific provision in the Bill does not, in any way, reflect on how seriously the Government take these issues. For example, in relation to high-cost credit, a number of initiatives are under way to improve standards in the sector. Those include work to improve industry codes on payday lending; research commissioned by the Department for Business, Innovation and Skills into the impact of a cap on total
	cost of credit; and a review by the OFT of payday lenders’ compliance with its irresponsible lending guidance. As well as raising standards now, the findings of those pieces of work will feed into the FCA’s approach to regulating the sector following the transfer, including on the type of rules it may make regarding these charges.

Alun Cairns: I appreciate the comments that have been made about the Bill and, specifically, about amendment 40. Does my hon. Friend agree that there is a risk of amendment 40 moving into price regulation, which is very different from product intervention? Price regulation would be a very dangerous line to follow.

Mark Hoban: My hon. Friend makes an important point, as we face a challenge in that respect. First, we believe that the FCA has the powers it needs to tackle payday lending. That could include some form of price intervention—

Stella Creasy: rose —

Mark Hoban: I ask the hon. Lady just to hold her horses for a moment. This is about the third time we have discussed this matter and she may want to engage in the debate later, but we need to understand the function of the market. The previous Government—[Interruption.] The hon. Member for Nottingham East (Chris Leslie) says that we are still making the wrong decisions, but our predecessors in government examined this issue of the cost of credit and concluded that price caps worked against the interests of consumers. This Government have, following the parliamentary debates on the matter, commissioned research to examine the impact of a cap on the total cost of credit. We should look at the research, understand what remedies are being proposed and follow that through. One of the advantages of moving the cost of the regulation of consumer credit away from the OFT to the FCA is that the FCA has a greater range of tools and can make a wider range of interventions than the more narrowly focused solutions of the OFT.

Nick de Bois: Does the Minister understand that the sense of concern is heightened by the fact that although the research is welcome, as yet there is no sense of urgency or indication of when it might become available? I would be grateful if he could suggest when we might see the fruits of that research.

Mark Hoban: I do not have that information on me, but I will endeavour to have it by the time I wind up the debate. It is important that there is evidence, that we do not respond on a knee-jerk basis and that we ensure that we protect vulnerable consumers. That includes ensuring that the right protection is in place for those who wish to borrow money to meet their needs and we should also ensure that we do not push them into the arms of illegal money lenders. One change we are making in this group of amendments includes ensuring that the work of the illegal money lending teams out in the regions can continue when we shift the regulation of consumer credit to the FCA.
	I am aware of these issues and it is important to the constituents of my hon. Friend the Member for Enfield North (Nick de Bois) and to mine that we get the right answer. A lot of work has gone on in the past to consider the cost of credit, and we need to proceed on the basis of evidence rather than closing our minds to what solutions there might be. Let us have some evidence to inform the debates so that we can give our constituents the right answer, rather than something that happens to be convenient to some political whim or desire. I believe that we should have evidence-based policy making and that that is the right approach. All the stakeholders would also agree that we need to support this work with some evidence, rather than proceeding without a firm evidential base.
	New clause 12 concerns the important issue of how consumers who take part in prepayment schemes are protected and how they are treated if the provider of such a scheme becomes insolvent. I suspect that many members of the House will have dealt with this matter over recent years, given how many people were affected by the collapse of Farepak just before Christmas 2006. The Government have great sympathy for those who have lost money in such schemes and are aware of the frustration they feel. One problem with the Farepak insolvency has been the fact that it has taken so long for the customers to get their money back. Work with the liquidators is continuing.
	The challenge is whether the Bill is the appropriate place for regulating such a function. Prepayment schemes are advance payments by a consumer for goods and services that are not supplied immediately; they are not financial services. It is not clear whether they are an issue for any of the bodies provided for in the Bill to consider and I do not think they will be a matter for the Financial Policy Committee, with its remit of considering threats to financial stability.
	Since the collapse of Farepak, a considerable amount of work has been done to consider how best to protect consumers who enter into prepayment schemes and how best to deal with situations where companies collapse. Following the collapse of Farepak, the then Department of Trade and Industry worked with the remaining hamper companies to put in place effective protection for customers’ prepayments, including oversight by a new body, the Christmas Prepayment Association. The Government also supported the OFT to deliver a consumer awareness and education campaign to empower consumers to make decisions that are right for their circumstances. The Money Advice Service also provides advice on its website about what protection is offered for various ways of saving money, including prepayment schemes. I would encourage hon. Members who are aware of constituents who continue to engage with such schemes to point them in the direction of the Money Advice Service.

Katy Clark: If the Minister does not feel that this Bill is the appropriate vehicle for dealing with that matter through regulation, when he sums up could he outline where it should be dealt with? There is a strong view that the current legislative framework is not sufficient.

Mark Hoban: Part of the challenge is that such schemes are part of a subset of advanced payment schemes that are not necessarily covered by the Bill. These issues are
	consumer issues and I shall certainly raise with my hon. Friend the Minister with responsibility for consumer affairs where he feels that the best opportunity might be to do that and whether there are some non-statutory alternatives to regulation that will help protect the customers of such schemes.
	Before I speak to Government amendment 3, I can let my hon. Friend the Member for Enfield North know when the research will be published. The research project will conclude this summer, and given that the transfer of consumer credit to the FCA will not take place until 2014, that gives us time to act. That is not to say that nothing is happening in the meantime in the regulation of consumer credit: the OFT is doing a great deal of work in that area. I am as keen as he and others are to ensure that the matter is brought to a head as soon as possible, so that the right protections are put in place for our constituents.
	Government amendment 3 aims to improve the drafting, following the close and valuable scrutiny in the Public Bill Committee. In Committee, questions were raised about the appropriateness of “supply”, and the amendment clarifies the Money Advice Service financial education function so that it should include the promotion of awareness of the financial advantages and disadvantages relating to issues that may arise over the lifetime of the product, not just to the initial purchase or supply of a particular good and service. The function might include, for example, promoting awareness of the financial advantages and disadvantages of a person exercising the right to receive part of their pension savings as a lump sum, or the financial advantages or disadvantages of the various options open to a person who is having difficulty paying their mortgage.
	I am confident that the Bill as it stands already provides for such matters to be covered by the Money Advice Service financial education function, but the amendment helpfully clarifies the scope of the MAS’s specific duty to promote awareness of the advantages and disadvantages of particular goods and services. I am grateful to the Members who raised the matter in the Committee, and I hope that the amendment addresses their concerns.
	Amendments 37 and 55 would affect the functions of the MAS. Amendment 55 would require the MAS to support the provision of legal advice in relation to personal debt, with funding received from the Ministry of Justice to support that work. The amendment would reinstate changes to legal aid in the Legal Aid, Sentencing and Punishment of Offenders Bill. For the reasons clearly set out by my right hon. and learned Friend the Justice Secretary, we cannot use the Financial Services Bill to compensate for reforms to legal aid in the other Bill as a roundabout way of maintaining funding for not-for-profit bodies; moreover, effectively reinstating those categories in the scope of legal aid means reinstating legal aid for all legal advice, not just for those in not-for-profit organisations.
	Amendment 55 is not required because the Money Advice Service already has sufficient responsibility and funding to assist members of the public with debt management. The MAS and other organisations provide debt advice directly, including by advising people who are facing difficulties with debt on the options available
	to them and the possible legal ramifications. For example, they provide advice to people who are at risk of losing their home and advice on options to resolve their financial difficulties. Any debt adviser trained to intermediate level can give advice on such matters as a matter of course. In contentious areas of law, such as the impact of insolvency or immigration status, an adviser could seek external advice. Similarly, if a non-debt issue arose, or substantive legal advice was required, an adviser could refer the client to a specialist solicitor. I therefore do not think the amendment is necessary, as the MAS and other organisations, through their debt advice services, already advise people facing difficulties with debt on the impact of the law on their situation.
	Amendment 37 would require the MAS to provide
	“targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”
	I am sympathetic to the intention behind the amendment: clearly, the service provided by the MAS should encompass such groups of people. However, as I said in Committee, one of the key features of the Money Advice Service is the breadth of consumers it is there to serve. Millions of people can be vulnerable to poor money management at any point in their lives, especially as they experience key life events. Similarly, many people, regardless of their financial circumstances, may not know where to turn for impartial financial advice, or may not know that they need information and advice in the first place. I therefore do not think it appropriate for the legislation to prescribe which groups are in most need of the service. By focusing the Money Advice Service on particular groups, we risk neglecting others who may be equally in need.
	It is clear to me, from discussions I have had with the management of the Money Advice Service, that they recognise the need to provide support across a wide range of people. They also recognise the importance of face-to-face debt and money advice and the importance of ensuring the right channels of support are there to help those in need of financial advice—for example, those who need guidance on how to get out of debt or how to protect their families in the long term. I believe the MAS is acutely aware of its broader social obligation.
	The group of amendments before us raises important issues that impact on many in our constituencies. The action that we have taken to tighten the consumer credit regime by moving consumer credit from the OFT to the FCA is the right way to proceed. This is a dynamic and changing market, and one of the great advantages that the FCA brings is the opportunity to keep issues such as the cost of credit under review and to make sure that it responds in a timely manner to help protect our constituents in these difficult areas.

Christopher Leslie: I suppose the Minister is right in one respect. This long group of amendments under the catch-all heading “Consumer protection” raises many issues about which our constituents care deeply. It is just a shame that the Minister is resisting and rebutting almost all of them, except the Government amendments. But I do not want to sound too churlish. He has conceded—we have managed to extract—one minor concession from the Government in Government amendment 3. I therefore feel that all those hours and weeks in Committee were productively spent, and for that small measure I am grateful to the hon. Gentleman.
	Time is short so I will comment on the series of amendments tabled by the Minister, and then on those in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). Government new clause 4 sets out a series of order-making powers for the Treasury in respect of the transfer of regulation of consumer credit matters from the Office of Fair Trading to the Financial Conduct Authority. I am grateful for the clarification of the Government’s intentions. My comments on this and the consequential amendments in the group relate to the time scale for these arrangements. The new clause sets out the paving changes rather than the regulations, saying that the Treasury may well make these orders in due course. It gives a sense of the architecture of those and the fact that most of the powers available to the OFT under the Financial Services and Markets Act 2000 will be available to the FCA and so on, but we do not yet have the time scale for those orders to be made and to take effect.
	Many loose ends remain, even after the amendments. How will the local weights and measures authorities dovetail with the new arrangements, the FCA and so forth? What is holding the Government up in making those changes, publishing the new arrangements and making it clear to those who may be slightly concerned that the transition period could create a sense of limbo in which a number of issues fall between the gaps? We do not want consumer credit arrangements to be put on the back burner during the transfer—quite the opposite. We need this time more than ever to help consumers who are under strain on various fronts, as is pointed out in the amendments tabled by my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), the hon. Member for Eastbourne (Stephen Lloyd) and others.
	New clause 9 in my name seeks, as the Minister mentioned, to require the Financial Conduct Authority to produce recommendations within a year of the commencement of the Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.
	For the sake of clarity, I should declare an old interest in this. For five years I was a trustee of the Consumer Credit Counselling Service, a not-for-profit provider of creditor charging debt management plans. It got lenders to pay for the process of helping to consolidate some of the debts of the most heavily indebted individuals in society, not charging them for the process but asking the banks and the lenders to chip in with a share of any proceeds that were recovered in order to pay for that process. That is the virtuous process that we should be looking for in the debt management plan industry. Unfortunately, there are a number of private for-profit providers who, instead of taking the charge for the administration of that consolidation process from the lender, go to the customer, the consumer, some of whom may be in fear for their houses and well-being because they have become so heavily indebted for whatever reason. Those are companies that I believe are preying on the desperation of customers who are heavily indebted.
	Worse, the charges on the consumers can often be made up front, so those customers who make payments to a debt management consolidator that is renegotiating their loans and credit often find that those payments can first go to pay the company’s charges before even a penny goes towards paying down some of the individuals’
	debts. There have been numerous stories over a number of years of many consumers who, while thinking that they are doing the right thing by consolidating their debt and getting the situation sorted out, find many months later that all they have done is feed the profits of those companies who were taking advantage at that time. That is why the Opposition say that enough if enough. The time has come to bring forward proposals to phase out the practice of fee-charging for the provision of debt management plans to customers. We have framed the new clause in such a way that it is in no way unreasonable. We have not insisted on a particular way in which this is done or a particular date. We have asked the FCA simply to bring forward recommendations about how this could be facilitated.

Lorely Burt: I have a huge amount of sympathy with the hon. Gentleman’s points about some companies that prey on some of the most vulnerable in our society who are in fear of the debt collector knocking on the door. However, would he tar every debt management company with the same brush? I have experience of companies that behave responsibly and extend a great deal of help to people to manage their financial affairs.

Christopher Leslie: That is a fair intervention. No, I would not say that they are all the same. There are companies, even those that may for some reason be using this fee charging process, that want to do the right thing, but my point is that that business model has had its time and needs to go. There is a better way, whether it is a for-profit or a non-profit avenue, for debt management consolidation to take place, and that is to tell the creditor that this is a way for them to get some money back, albeit not necessarily the full amount, from those heavily indebted customers who may owe them something, and in exchange for getting something back they have a duty as a creditor to stump up some of the cost for the administration of that consolidation. It is time to end the business model that has a propensity to cause hardship, not in every single case, but in too many cases, and that is why the Opposition believe that this is a perfectly reasonable new clause to bring forward.
	New clause 10 concerns mortgages. People may well ask where the problem is at the time being when mortgage rates are at a low level, partly because the Bank of England is printing so much money that we end up with a low base rate. But the Governor of the Bank of England has been warning in a number of reports that this is an unsustainable situation and that over the medium term he expects interest rates to normalise. From the Bank of England’s point of view, whether the normalised interest rate is 4% or 5% is moot, but it is certainly much higher than the current rate.
	My anxiety is that many consumers up and down the country might be under the false impression that this is a normal period, but it is not. If the mark-ups that the retail banks charge on the wholesale cost of borrowing are maintained as base rates or LIBOR rise to a more normal level, the mortgage rates that our constituents pay could end up being significantly higher, at 6%, 7% or 8%. I suspect that the difference between the price the banks pay wholesale for their money and the amount they charge customers upfront has been growing and is too wide. As soon as LIBOR creeps up, if that mark-up is maintained, we could be in serious difficulties, which is why the new clause is essential at this time.
	This is a stitch-in-time new clause. We have tabled the proposal because we believe that now is a good time to require all the banks to forewarn their customers about a number of possible scenarios so that home owners with mortgages have the information necessary to prepare for them. Often when those of us with mortgages get information from lenders it is a set of retrospective information, for example on how much we have paid to defray the cost of our mortgage. We believe that it is now essential to forewarn customers about what could come in future, because we have to find a way of ending shocks to consumers, especially when changes to standard variable rates can sometimes be made with as little as two weeks’ notice.

Alun Cairns: I am trying to follow the hon. Gentleman’s argument, but how on earth could any individual or organisation predict with certainty what will happen in future?

Christopher Leslie: The hon. Gentleman is right that it is impossible to predict with certainty, but this is about scenario planning and preparedness. He will know that the Governor of the Bank of England has been saying what he regards normalised base rates to be, broadly speaking. Does the hon. Gentleman not think that our constituents, especially those on variable interest rates—this might not apply to all customers with mortgages, some of whom might have fixed rates—ought to be able to see when their rates fluctuate because of the fortunes of the base rate or, as is often the case, the standard variable rate determined by their bank, and does he not think that those banks ought to help their customers plan for the future? If we end up yet again with a cycle in which people find that they cannot make their payments and their homes are repossessed, we will all have those constituents in our surgeries.
	Let me give the hon. Gentleman an example. A couple of weeks ago Halifax announced that it would increase its standard variable rate by 0.5% from 1 May. RBS NatWest has done similarly, as have Clydesdale bank, Yorkshire bank and Bank of Ireland. In my view, all those increases are the result not of base rate changes, but of the fact that those banks are looking to repair their balance sheets not by squeezing remuneration and bearing down on the senior executive management costs that we all know they have, but by trying gradually to take a little more money from consumers. That is why we need a warning for customers in these circumstances.

Alun Cairns: I fail to understand the logic of the hon. Gentleman’s argument. If someone’s financial position at the time they take out a mortgage is relatively precarious, they probably should not have the mortgage. Furthermore, to take the logic to the next step, surely a fixed rate product would be better for those people and they should not have been on the variable rate product in the first place, so why on earth are we asking banks through additional regulation to make such predictions when it is meaningless in the reality of life?

Christopher Leslie: We are doing this because the hon. Gentleman and I are here to represent our constituents, some of whom will be on variable rate mortgages in these circumstances. All we are saying is that we want
	all the banks to warn of the potential impact of rate changes across a range of scenarios. It is about helping customers anticipate what might be around the corner. It is as simple as that. The banks will give all sorts of reasons for increasing their standard variable rates. For example, they claim that costs make it difficult and often cite the special liquidity scheme, which is now beginning to taper off so the taxpayer safety net is beginning to come away, but taking more and more from consumers is in many ways unfair. I think that Lloyds bank recently borrowed many billions from the European Central Bank as part of its long-term refinancing option, so there is cheap money available wholesale for the banks. We have to keep an eye out for the way they sometimes seek to make an excessive profit off the backs of ordinary mortgage customers.

David Rutley: I appreciate the rationale that the hon. Gentleman is putting forward and that he is trying to protect customers, but I have to agree with my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on the impracticality of the proposal. There now seems to be a tendency to make proposals on single products, but the Bill is about financial stability in the round, which we are trying to achieve, so is he seeking to introduce a similar forewarning system for savers on fixed incomes, who find interest rate changes equally worrying?

Christopher Leslie: There might well be a case for that, but we are talking about people’s homes and the roofs over their heads. Repossessions can seriously hurt people, especially if they were unable to anticipate the situation because of a shock or unpredicted changes to their interest rates. As I have said, this point in the cycle is the right time to make this sort of change. It is about preparedness and information for home owners, and I feel strongly that we ought to have that in statute. If the Minister does not agree, this is certainly one of the issues on which we want to test the will of the House.

Mark Garnier: Will the hon. Gentleman give way?

Christopher Leslie: I will give way, but there are a number of other amendments I have to talk about.

Mark Garnier: I am incredibly grateful to the hon. Gentleman. He talks about an incredibly significant problem in this country: the £1.2 trillion-worth of mortgage debt for all the people of this land. What he is describing is a steepening in the yield curve, but that could also be the result of an increase in deposit rates, so what could be taken away with one hand could be a result of giving with the other hand. What I am really struggling with in the new clause is how he envisages mortgage lenders being able to deliver the warning, given the fact that he defines a shock in interest rates as something that cannot be predicted. Moreover, how does he envisage this working in practice?

Christopher Leslie: The hon. Gentleman might know that in annual pension statements, for example, in the key facts documents a number of scenarios are put forward for what the pension might be worth under a range of growth options, such as annual growth of 3%, 5% or 9%. All I am seeking to do is ask the Financial Conduct
	Authority to consider a way of giving a range of scenarios and helping to provide information for customers, which would not be impossible. That is why I think that that is necessary for mortgages. I hope that hon. Members on both sides of the House will support what is a pretty modest change. It is something that I know we are all concerned about. The Government definitely need to go away and look at the issue again.
	Amendment 37, which also stands in my name, relates to the Consumer Financial Education Body, which we now call the Money Advice Service. We are seeking to amend the Bill so that it specifically targets
	“proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”
	In our view, it is vital that the Money Advice Service focuses as much effort as possible on the vulnerable and those susceptible to problems, whether as a result of misinformation or choices made in financial investments. We know already, from examples in our surgeries, that those on the lowest incomes—the most vulnerable in society—need to be better protected in legislation, and that is why the new clause has been tabled.
	The Money Advice Service has started off its work by focusing on providing information to people from all corners of society, whether very rich, middle-class or on low incomes, but if it is to ramp up its work it needs to start by helping, as a priority, those on the lowest incomes and building from there, because they are the ones whose lives are most affected when investments, saving and borrowing go wrong.
	There has been some criticism of the Money Advice Service, given the way in which much face-to-face advice has been outsourced while it concentrates on a web-based approach. There have been significant job reductions at the service, it has de-prioritised face-to-face services, and there has been a reliance on citizens advice bureaux and on debt advice agencies, such as those in my constituency. I visited St Ann’s welfare advice centre in Nottingham this week, and the level of cuts that it is experiencing is appalling. Whether because of legal aid reductions or local authority grant cuts, the ability of organisations to give face-to-face debt and welfare advice is shrinking day by day as the number of appointments that are available declines and the time that can be committed to support people disappears.
	That is why the new clause would explicitly encourage the Money Advice Service to help those who are financially excluded or in financial distress. I am sorry that the Minister said we should not prescribe “particular groups” in the Bill. We are not talking about a particular group; we are talking about some of the most needy in society. That is why the new clause is very important indeed.
	Finally, I turn to amendment 40, which I know my hon. Friend the Member for Walthamstow (Stella Creasy) will speak to. We discussed its provisions in Committee, and although we will not have a chance to vote on it today, because—for various arcane parliamentary reasons—if there is a Division it will be on day two of our proceedings, we will certainly debate it today. It is right that we ask the Financial Conduct Authority to make rules or apply a sanction to authorised persons if they offer credit on terms that are judged to cause consumer detriment, and those rules should include the
	maximum total cost for consumers of a product and should determine the maximum duration of the supply of a product or service to an individual.
	The Minister’s rebuttal of the proposal was very disappointing. He said that we should not be “distracting the regulator” by including, explicitly in the Bill, that particular power, but sometimes writing and enshrining such provisions explicitly in a Bill does matter. The Minister also said that the provision might get us into a “long laundry list” of circumstances and be a “knee-jerk” response. He even said that it was a “political whim”, but that really is not the right approach to take when trying to find a consensus on tackling high-cost lending, particularly when so many of our constituents get sucked into that world and are often ripped off in the process.
	The Minister did not even know when the research, which has been around for heaven knows—[ Interruption ] —for 18 months, my hon. Friend the Member for North Ayrshire and Arransays—will come to fruition. If ever there were a definition of political long grass, that would seem to be it. He should get his mower out, cut the grass, get on with the process and tell us when the research is going to come to fruition. We want to see in the Bill a specific commitment to make these powers available for the Financial Conduct Authority. Heavily indebted individuals are burdened in any number of ways, and if things get worse and they are sucked into high-cost credit arrangements, that can be difficult.
	There are some circumstances—emergencies, or bridging-loan arrangements—when some individuals might need to tide themselves over for a short time, but sometimes the administrative costs of such very short-term loans can result in a charge that, when looked at through the prism of the APR, look especially high. We do not want rules that completely freeze out people’s ability to secure bridging loans in such exceptional circumstances, but the point is that they should be exceptional circumstances; people should not be sucked into dependency on high-cost credit arrangements. The duration of their dependency needs to be regulated, and we should look at the total cost involved, and perhaps prevent the roll-over of some arrangements.
	I commend my hon. Friend the Member for Walthamstow (Stella Creasy) and the hon. Members for Kettering (Mr Hollobone) and for Worthing West (Sir Peter Bottomley) and others who have signed up to the amendment. It is a cross-party issue that has come up on several occasions, and I wish my hon. Friend well with it.
	There are, as the Minister said, important issues in this group of amendments—absolutely, there are. For me, new clause 10 is one of the most important, but I commend them all to hon. Members.

Justin Tomlinson: I shall speak briefly to a number of amendments that are inter-linked, because the protection of vulnerable consumers cannot be taken in isolation. A series of measures needs to be taken to protect those who need the most help.
	Members on both sides of the House will support the principle of amendment 40, on the total cost of loans, but it is important that through the review we find a way of making it work. We do not want to push people into the hands of illegal loan sharks, and the review, which has been going on for 18 months now, needs to
	conclude so that we can start to make progress, but we need to look at all the variables, including the need to limit the amount of roll-overs.
	The shadow Minister described how people might use such loans in exceptional circumstances, but there are two aspects to that. First, there are some people who, through consumer choice, might wish to take out such loans, so to my mind we should have compulsory credit checks. If people who can afford to service such debts make a consumer decision to be relatively inefficient with their money, that is up to them, as long as they can afford to do so, but if vulnerable consumers get trapped in a cycle of debt and need protection, a limit on the amount of roll-overs will be absolutely essential.
	I talk to a number of high-street lenders—including The Money Shop—which look at people’s bank statements, but it is not unusual for people to have more than one bank account, and the reason I am so keen on credit checks is that although people often look after one bank account in an orderly manner, that is the one they present when applying for a loan, not the one that is in financial chaos.

Nick de Bois: My hon. Friend refers to the review, but alongside other points he has made, would it be worth considering lending techniques such as doorstep lending and similar?

Justin Tomlinson: My hon. Friend makes an important point. In previous debates, I focused my anger on the techniques of doorstep lenders, who build up a relationship with the consumer, pop by once a month and, over a cup of tea, suggest items for which they might want to borrow money, trapping them in a lifetime of expensive, high-cost debt. For example, they might pop round at Christmas to ask, “Have you organised your Christmas presents for your children?” The householder says, “No, I’m not sure I can afford it,” to which the lender replies, “No problem. We’re here. We can lend you that. It’s only £3 a week. I’m sure you’re going to be having relatives to visit, so why don’t you get your carpet sorted at the same time.” Those nudge-nudge techniques, which encourage people to take on high-cost debt, need to be looked at.
	Amendments 37 and 55 seek to empower consumers, and there are important factors, such as the need to access impartial advice, that need to be looked at. I found through my work as chair of the all-party group on financial education that 91% of people who got into financial difficulty would have made a different decision had they known otherwise. Hindsight is a wonderful thing, but through our casework as MPs we see that some people make the wrong decisions and get themselves into difficulty. Of the three ways I would like to see that tackled, one is by the provision of easy access to advice through organisations such as the Consumer Credit Counselling Service, Citizens Advice and the Money Advice Service. To my mind, if a debt management service offers a high-cost loan, it should provide links to those organisations, just as when somebody buys a packet of cigarettes, there is a health warning on it. There is then no excuse. It relies on consumer choice, but if somebody chooses to, they can take up the advice.
	It will also help if all consumers have financial education in the first place so that they understand the advice. In the case of the Money Advice Service, one needs to know something about the products in the first place. Obviously, face-to-face advice would be ideal. I would also like all loans to be displayed in pure and simple cash terms, so that every consumer can make an informed decision. I am sure that even Treasury Ministers would struggle to work out what is meant by an APR. I will not embarrass individual MPs by carrying out a test, as I have in previous debates.
	Finally, I deal with clause 10. I was interested in the Minister’s comments about advice being given to consumers six months in advance. As we all recognise, that presents a challenge, because if somebody could predict what will happen in six months’ time, they would be very wealthy. The principle is right: we need to protect consumers from sudden changes. The evidence shows that the majority of people who fall into financial difficulties do so because of a change of circumstances such as the loss of a job, a family bereavement or a divorce. One could extend that to a sudden change in the cost of a loan because of the interest rates.
	Although this is often derided, I think that we need to encourage a savings culture. If one has money in reserve, one is better equipped to deal with a sudden shock to one’s circumstances. I welcome the moves of the Nationwide building society for first-time buyers, because they are among those most at risk from a change in circumstances owing to a change in their job or in their interest rates, because they extend their borrowing to the absolute limit to get themselves on the housing ladder. Nationwide has introduced a linked savings account into which people have to put regular savings for the six months to a year that they are trying to get their first mortgage. It encourages them to carry on doing so, so that if interest rates and the cost of their loan go up suddenly, they have a financial buffer. More could be done to encourage the industry to promote such products.

Katy Clark: It is a pleasure to speak to new clause 12, which I tabled along with many other hon. Members. It would require the Financial Policy Committee to
	“carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.”
	It would require the report to include
	“an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets…in the event of insolvency.”
	I come to this issue as a result of the experiences of my constituents when the Farepak Christmas savings club collapsed on 13 October 2006. Many hon. Members will be well aware of the background to the Farepak issue, which has been raised in this Chamber on a number of occasions. More than five years after the collapse of the company, almost none of the 120,000 people who lost out have received a penny of their money back. Those 120,000 savers lost about £38 million. Some money was distributed as a result of a response fund, which was set up in the lead-up to Christmas 2006, but the people who lost out have not received any money from those who are dealing with Farepak’s assets.
	In my constituency, hundreds of families were affected. I pay tribute to my constituents Louise McDaid and Jean McLardy, who, along with many others, set up the
	Farepak victims committee, which continues to campaign for justice for those who lost out as a result of Farepak’s collapse.

Jessica Morden: Will my hon. Friend add to that list my constituent Deborah Harvey, who was a Farepak agent and who has campaigned tirelessly with the Farepak victims committee? The committee recently contacted a raft of companies that run prepayment schemes to seek assurances about the future protection of people’s money, but it has not had a welcoming response. Does my hon. Friend agree that we owe it to Farepak’s victims to ensure that this sort of thing never happens again and that such people are protected in legislation?

Katy Clark: I congratulate my hon. Friend on her work on this issue. She led an Adjournment debate about it shortly before Christmas to commemorate the fifth anniversary of Farepak’s collapse.
	I, too, pay tribute to Deborah Harvey, who is the current secretary of the Farepak victims committee and who has done a tremendous amount of work on this issue. The Farepak victims committee is unusual in that it has continued, in an organised way, to bring people together on this issue over a long period. One problem is that the type of people who tend to be affected when such things happen are not organised. The work done by Louise McDaid, Jean McLardy, Deborah Harvey and many others has helped to keep the issue in the spotlight. It is important to look at the situation again today, because it is a disgrace that, five years on, it has not been brought to a conclusion and people still do not know for sure how much money they will get back.
	One reason for the huge problems was that the Farepak victims were unsecured creditors. That meant that when the company went bust, the money that they had paid in was not protected, as it is secured creditors who get preference. We need to look at the model whereby people pay money in and effectively save up for goods that they have not received.

Robert Buckland: The hon. Lady is outlining the gap between the perceptions of those who were saving with Farepak, which was based in my constituency, and the reality of the regulatory framework. The gap was between people’s belief that they were saving into a pot that they would be able to reclaim from and the reality, which was that they were unsecured creditors. That must never be allowed to happen again. This is a chance for change so that we do not again see the abuse that we saw with Farepak .

Katy Clark: I am grateful to the hon. Gentleman for his intervention. He has shown that he has a full grasp of the issues. Many of those who saved through Farepak for Christmas 2006 believed that there was some form of protection for the money that they put in. They were of the opinion that they were being responsible by saving in that way. My view is that they were being responsible. We have a duty, as legislators, to put protections in statute to enable people to continue to save using such models. I think that those people had a reasonable expectation that there was regulation in place to protect the money that they put in. Many of them presumed that there was such regulation.
	Five years ago, a voluntary body called the Christmas Prepayment Association was set up. However, many prepayment companies are not members of that organisation and there is no requirement for them to belong to it. Some of the biggest players in the market, such as Tesco and Asda, are not members. The association covers only Christmas schemes and not the wider prepayment sector.
	I believe that the prepayment sector has not been regulated because, over time, different forms of prepayment have developed. Mechanisms have been put in place to provide protection for the earliest types of prepayment, such as those used in the travel industry. The Farepak case highlights important failings in the regulation of the prepayment industry. It has become clear that that lack of regulation extends not just to the Christmas hamper sector, but to a wide range of prepayment situations in which consumers pay in advance of receiving goods. I have already mentioned the holiday sector, in which the Association of British Travel Agents operates, and there are many other situations in which a customer pays for something by way of instalments.
	That practice is usually undertaken by those of limited means, who are at risk of losing both their money and the product if the fund goes bust before they take delivery. Such a form of payment is used by such large organisations as Tesco and Asda, but also by small organisations in all our communities. Some people pay over a period for goods for a celebration, for example, perhaps paying a butcher instalments of £10 a week. We should provide a statutory framework so that such people get some type of preference if the organisation in question no longer exists.
	One reason why it is important to have regulation is that it tends to be people from poorer communities who pay in advance by instalment. They are exactly the people who can least afford to lose out, and I do not believe that they should carry the risk when they choose that model of payment for goods. Many of them honestly assume that their money will be ring-fenced in some way.
	We need to move to a model whereby moneys that are prepaid are effectively held in trust, and any organisation that can no longer deliver the goods because of a collapse gives those moneys priority. I therefore believe that it is appropriate that an organisation such as the Financial Policy Committee examines the issue. Prepayment exists in a wide range of scenarios, with people paying over a period in advance of receiving the goods. I therefore ask the Government to look sympathetically on new clause 12 and consider pursuing the course of action that it suggests.

Lorely Burt: I begin by warmly welcoming the Government amendments that provide further clarity on the intention to transfer the regulation of all consumer credit businesses currently regulated by the Office of Fair Trading to the Financial Conduct Authority, while retaining all the protections that consumers currently enjoy under the Consumer Credit Act 1974.
	New clause 9 would commit the Government to phasing out charges for debt management plans. Whatever the hon. Member for Nottingham East (Chris Leslie) thinks, businesses providing those plans are in the main legitimate. He talked about the scandalous behaviour in
	which certain debt management companies have indulged, but a number of companies look after their customers effectively and caringly.

Katy Clark: Does the hon. Lady agree that one cause for concern must be the fact that organisations profit from debt management? The charging of fees by profit-making organisations seems inappropriate. Does she agree that we should encourage voluntary and non-profit making organisations in the sector?

Lorely Burt: Of course I would encourage such organisations, and as my hon. Friend the Member for North Swindon (Justin Tomlinson) said, we need to give people financial education. There is an image of companies profiting from others’ misery, but there are companies that act responsibly and ethically, so I do not support new clause 9. It is a shame that all companies have to be tarred with the same brush, and the new clause would remove an element of choice from the consumer. Of course, many consumers would not choose a debt management company over a free service given the choice.

Yvonne Fovargue: Does the hon. Lady agree that one problem is that consumers making a distress purchase do not know which companies are reputable? Unfortunately, the ones at the top of the Google list tend to be the least reputable.

Lorely Burt: I agree that the companies that spend money on unsolicited calls to people who may have a financial problem are the ones that need to make the most profit, to cover the cost of doing so. However, responsibility for debt management is moving to the new FCA, and new guidelines are being issued. As long as those guidelines are strong and properly enforced, part of the market may still be able to benefit from providing debt management advice.

Sheila Gilmore: Will the hon. Lady consider the fact that it is not necessarily about whether there are charges so much as it is about who pays them? The intention behind the new clause is to protect consumers from being the ones who pay. Is it not possible that debt management companies can find another way of funding their work rather than having consumers pay the price?

Lorely Burt: That should ideally be the situation, and when the new regulations are produced there should be a careful consideration of whether any up-front fees should be paid to debt management companies.
	New clause 10 would require mortgage lenders to inform existing customers about potential interest rate changes. I have to declare an interest: I was a mortgage adviser in one of my past lives, so I know a little bit about the matter, and I suggest that any reputable mortgage company should do that anyway. It is not in their interests to encourage people to take on mortgages that they will not be able to repay should financial circumstances worsen. The new clause may therefore be superfluous. I completely understand and appreciate the sentiment behind it, but the matter will probably fall within the FCA rules and within the ethical behaviour that one should expect from any mortgage lender.

Christopher Leslie: I appreciate the hon. Lady’s comments, but if she cannot support the new clause, will she at least join me in encouraging the regulator to ensure that all banks think about informing customers of potential interest rate changes as a matter of course? One bank doing it would not be enough; we need them all to engage in that forward planning.

Lorely Burt: I agree entirely, and we already have a provision to enable that to happen.
	My hon. Friend said that one building society requires customers to save with it before getting a mortgage there. When I had my first mortgage, more years ago than I care to admit to, that was the norm. People were expected to be a customer of a building society before getting a mortgage from it, which encouraged a way of saving that we seem to have lost in many areas of our society. I support the sentiment behind the new clause, but I do not believe we need it.
	New clause 12 calls for a review of prepayment schemes, including an analysis of whether customers should be preferential creditors in the event of insolvency. The Farepak issue, and the tragedy of its customers, is emblazoned on our minds. Victims of other financial schemes such as Equitable Life still write to me virtually every week, but the new clause relates particularly to prepayment. Many structural issues contributed to Farepak’s demise and they need to be addressed. Many unsecured creditors suffer when such a company collapses. I am attracted to the idea of giving prepayment scheme customers a form of secured creditor status, as the hon. Member for North Ayrshire and Arran (Katy Clark) suggests. The Minister has advised that such a measure is not appropriate within the remit of the Bill, because a prepayment company is not a financial services company, but perhaps he could advise us on an appropriate route for looking at the proposal in a little more depth.
	Amendment 40 is on the total cost of credit. Members on both sides of the House have a great deal of sympathy with it, because it would be an attractive way of controlling the enormous amounts of interest that are being charged. I do not want to go into all payday lending issues—I was reminded the other day that payday lenders constitute only 0.6% of the credit market, even if it is a hugely important part of that market—but the hon. Member for Walthamstow (Stella Creasy), who has spoken on the matter at some length, has pointed out that the market affects some of the most vulnerable people. The Minister has been kind enough to tell us that the report, which is eagerly and anxiously awaited by hon. Members, will come out in the summer. We look forward to the report, and to moving ahead as quickly as possible after it is published.

Stella Creasy: Borrowing has always been a part of the British way of life and part of our debates in the House as long as I have been an MP, but as we argue how best to tackle the nation’s debt, we forget at our peril the need to help our constituents to manage their debts. As the Minister pointed out, amendment 40 is our third attempt to help our constituents to manage their debts and to give them the kind of protections from such toxic credit that others around the world take for granted.
	I hope I can convince the Minister that this is not a political whim, but a matter of deep importance to many who are struggling with such companies, not just in my constituency, but in constituencies across the country. If he is not convinced, I urge him to come to one of my surgeries, or to come with me down my high street, which now has 16 such companies, to see the problem and understand the urgency of action. I am sure the hon. Members for Enfield North (Nick de Bois), for North Swindon (Justin Tomlinson) and for South Swindon (Mr Buckland) have the same problems in their constituencies. The amendment is about urgent action. Too many in our communities cannot afford to wait for the outcome of research in the summer, let alone for future legislation at some unknown point.
	Let me start by finding common ground. I welcome the development of the Financial Conduct Authority and its role in managing consumer credit, and the statement that it will be more willing to intervene to address problems with financial products. The question we must address today—it is what the amendment speaks to—is whether the new authority will have the teeth to deal with the problems our constituents face and act in their interests. The amendment is designed to end any uncertainty on that by giving explicit authority to the FCA to act on one aspect of our consumer market that many hon. Members are concerned about. I want to put on record my thanks to those on both sides of the House who have co-signed the amendment. That speaks to the disquiet that many have that no alternatives have been put forward.
	We know why there are problems, but it is worth repeating the reasons. As the costs of food, energy and transport soar and as unemployment continues to bite family households, and as wages freeze, British families are struggling and borrowing to manage their daily needs. Aviva’s work shows that UK families owe on average £10,500, which represents nearly half the average annual household income of £23,000. That level of debt will only increase, because there is no end in sight to the financial pressures people face. One in six of our nation is now a “zombie debtor”, which means a person who is able only to service the interest on their debt and not reduce it, and a third of us have no savings at all.
	Since the start of the recession, mainstream lenders such as high street banks have been much less willing to lend money, but the truth is that for many, banks are making things worse, not better. Average overdraft fees in this country have simply been reduced from £25 to £12 a day, which is still a huge sum for people who have no money. Credit card rates have soared by 2% recently, taking the average interest rate to its highest level in 13 years, despite the Bank of England base rate remaining at 0.5% for 25 months. It is little wonder that many people are turning to the high-cost credit market to make ends meet.
	Last year, the payday loan sector in this country was worth £1.7 billion, a fivefold increase in a year. Research by R3 tells us that nearly 4 million people will take out a payday loan in the coming months alone. The annual percentage rate—it is a misleading term, but it is still worth looking at—can begin at 444% and escalate to 16,500% or more. Home credit lenders, about which the hon. Member for North Swindon has warned us, can charge £82 in interest and collection charges for every £100 loaned.
	It is little wonder that Payplan, a debt charity, is seeing a deluge of people in financial difficulty as a result of the payday loan market. It says that nearly half its clients had six or more payday loans in the last year alone. More than half owe more than £500 to those companies and, crucially, 61% had more than one loan at a time. Eighty-six per cent. of Payplan’s clients used their loans for basics such as food, transport and the everyday costs of living, not luxuries.
	Such lenders are exploding across our towns and cities. Dollar Financial underpins Money Shop. Money Shop had just one store in 1992; it now has 450 shops across the UK. There are two in my high street in Walthamstow. Meanwhile, our friends at Wonga have secured £73 million from the Wellcome Trust to expand their operations; the Provident Financial share price has risen by 16% since the comprehensive spending review; and BrightHouse, which provides hire purchase agreements at hugely extortionate rates, has announced plans to nearly treble the number of stores it operates in our country.
	The FCA has many toxic practices in the market to address. As the high-cost credit industry admits, a quarter of home credit users and a quarter of payday users have no other form of credit. As consumers, therefore, they do not have the power to shop around for more affordable forms of credit. That many of those firms do not do credit checks means that customers who borrow regularly from them cannot build up a track record to show to other lenders to prove that they are credit worthy so that they can borrow at more acceptable prices.
	High-cost credit companies have high fixed costs, so they make their money by repeat lending, meaning that their entire business strategy is geared towards repeat borrowing and the “rolling over” of loans, about which many hon. Members are concerned. Thirty-two per cent. of payday loans are refinanced—the average is twice—and 15% of doorstep loans are refinanced before the end of their term. All hon. Members know what “rolling over” means: it means that interest can be charged on interest accrued as well as the initial amount loaned.
	Such companies also engage in aggressive marketing campaigns to encourage that repeat borrowing, persistently offering customers the opportunity to extend their loans and take out new ones. There is strong anecdotal evidence that many of those companies lend consumers more money than they can afford to pay back in a month to ensure that they have to roll over their loan.
	Above all, the rates charged by high-cost credit companies often do not reflect any economic rate, meaning one that reflects competition in the market or the cost of lending. That is why rates vary so substantially, from 4,500% with Wonga to a mere 2,500% with Uncle Buck, 1,700% with Kwik Cash or 1,200% with PaydayUK. There is simply a lack of competition in the market to drive the price down in the way Ministers expect.

Justin Tomlinson: There is a lot of competition, but because people cannot understand APRs, it is irrelevant. If repayments were displayed in cash terms, competition would kick in and help consumers.

Stella Creasy: The hon. Gentleman slightly pre-empts me. I was about to say that the doorstep market, 67% of which is owned by Provident Financial, is not competitive.
	Nevertheless, his point about APRs being difficult to understand is well understood.
	The amendment is not a panacea. We need total cost caps on credit charges so that consumers have an explicit amount beyond which the cost of any loan will never go—interest rates, administration charges and late repayment fees included. I also agree strongly with the hon. Member for North Swindon about financial education and investment in debt advocacy services to give consumers help to negotiate with creditors and the support needed to make good decisions.
	We also need an expansion in alternative sources of affordable credit through credit unions and social finance. The idea that the market will somehow reduce prices where there is disparity between the consumer and supplier belongs in the textbooks, not real life. We also need a proactive regulator to ensure effective competition and protection against consumer detriments. The amendment would address those problems and the opportunity, presented by the FCA, to take action as quickly as possible and to prevent the problems in our communities created by these loans from becoming worse.
	I agree with the Chair of the Treasury Committee, who said about replacing the FSA:
	“The creation of the FCA is an opportunity to create something much better. If we are not careful, the FCA will become the poor relation among the new institutions. But it is the one that will matter most to millions of consumers.”
	However, for the FCA to be that better institution, its power to act on toxic financial products needs to be made clear. The financial services practitioner panel stated:
	“We acknowledge that it will be useful for the FCA to have tighter powers to control any product that can and does do harm.”
	The amendment is in that spirit. It would give explicit powers to the FCA to cap, where it sees appropriate, the charges firms can apply.
	I understand that the Government have been briefing people that those powers are not needed because the FCA already has product intervention powers. The Minister seems to think that that could happen, but he must address two questions: first, can it intervene and, secondly, are its powers of deterrence or sanction appropriate to the toxicity we all want to prevent? Clearly, there are good grounds to fear that the first is not the case. In his speech today and in the document setting out the FCA’s powers, there are somersaults and loops worthy of the Olympics gymnastics team. The document states:
	“The government has said that the FCA will not be an economic regulator in the sense of prescribing returns for financial products or services. The FCA will, however, be interested in prices because prices and margins can be key indicators of whether a market is competitive. Where its powers allow, the FCA will take into consideration more positively the cost of products or services in making judgements about whether consumers are being fairly treated. Where competition is impaired, price intervention by the FCA may be one of a number of tools necessary to protect consumers.”
	I am sorry to disappoint the hon. Member for Vale of Glamorgan (Alun Cairns), who is not in his place, but that is part of the Government’s thinking.
	The problem, however, is that the Government’s thinking is fuzzy. Lawyers in this area have highlighted the lack of clarity about whether the FCA is intended to be a price regulator and about whether the legislation proposes such a thing. John Odgers, the lawyer for Which?, highlighted that point in his written evidence to the Treasury Committee:
	“It seems to me to be desirable that a power of price intervention should be spelled out, if it is intended. Financial services regulators have not in this jurisdiction previously exercised that type of power, and might in future be loth to do so without a specific statutory authority, as the use of such a power would be particularly likely to attract a challenge.”
	The Minister should talk to the OFT. It is particularly well placed to tell the FCA about the problems that the fear of legal scrutiny places on consumer credit regulation. As it admitted, that fear has defined its work in this field and its lack of action against these firms. It has feared the cost to the public purse of unsuccessful legal actions. In his evidence to the Public Accounts Committee on 5 September last year, the chair of the OFT stated that
	“there are companies now pursuing particular practices that 10 or 15 years ago perhaps would not have employed the most expensive lawyers and taken every point under the sun. Now, however, that is happening with an increasing number of cases where you might have otherwise expected the party to throw in the towel after the first round. They do not do that, and therefore we have to take very careful assessments. We have a particular case at the moment that I have in mind where, much to my surprise, the parties have involved the most expensive City lawyers, and we know perfectly well that we are at substantial risks on costs if we lose.”
	It is little wonder that Google has a stronger track record on taking action against such adverts and firms than the OFT, which, in the past eight years, has managed to take action against one brokerage firm only.

Susan Elan Jones: Are the Government extremely weak on this issue compared with other Governments around the world?

Stella Creasy: We should listen to the companies themselves. They state explicitly that they are coming to the UK and expanding their operations here at an alarming rate precisely because of the lack of regulation of our payday industry in comparison with other countries. They are clear that, because we do not have that regulation, we are fertile territory for their practices.
	The Treasury Select Committee stated:
	“There remains confusion about the role of the FCA in price regulation. We recommend that the Government clarifies”
	the matter. That is crucial. We can make speeches in Parliament saying that we wish this to happen—I welcome the fact that the Minister believes such a power possible—but without explicit legal guidance it is unlikely that the new regulator will be able to take action. That is what the amendment is about.
	The second question is about whether other powers will be available to affect the kinds of behaviour we all want stopped. In an industry where one firm posted a pre-tax profit this year of £162 million, a fine for consumer detriment would simply be an occupational hazard, not a deterrent. Given that the chief executive of another firm earned £1.6 million in a single year and that the maximum fine the OFT can levy is £50,000, it would simply be annoying, not a wake-up call.
	Taking away these firms’ consumer credit licences, which, as I said, has happened only once in the past eight years, is only one possible solution, and the regulators would rightly wish to hold such a nuclear response in reserve. On the other hand, regulating what companies can charge and the product through regulating their cost and duration could benefit consumer credit markets and the companies themselves by setting clear guidelines about what is acceptable in the UK. We would all agree, I am sure, that such a power would need to be used only once for the industry to get the message that this county no longer tolerated legal loan sharking.
	This is the third time we have had this debate. I know the Minister understands the problems and that he shares my concerns about this industry and its impact on families across the country, but I question whether he is really committed to understanding the possible solutions at our disposal and the opportunity presented by the legislation to make progress and to send a clear message about the need to reform this market. He will win not only my gratitude and that of other Opposition Members dealing with these problems but the gratitude of “EastEnders” fans watching such problems unfolding on their screens and of the thousands of us living with high streets pockmarked with these companies. He will also win the support of the fans of the Cobblers, Tangerines and Jambos who are horrified to see companies targeting them through their football clubs. Let us do this now. Let us protect British consumers in the way they deserve. I ask the Minister please to support the amendment and to listen to Government Members who also wish to see progress. Let us have no more delay. The people whom we all represent who are struggling with these companies need and deserve better.

Yvonne Fovargue: I rise to support several of the amendments. I will speak first to new clause 9 on the phasing out of debt management companies. I accept that some of them might act ethically, but a great number do not, and the voluntary code of practice has simply not worked. We are talking about a distress purchase. People who buy a debt management plan will often have been worrying about it for months and months. They are looking on the internet at 3 o’clock in the morning and going to the first name they see. They do not know whether it is a member of a reputable trade body. They simply see, with relief, that someone can help them with their debts. It is no wonder that the number of complaints to the Financial Ombudsman Service about these companies’ practices has rocketed in recent years. The cost of policing and dealing with these organisations is disproportionate. It would be much easier to phase them out and put that money into the free sector so that it can ensure that creditors, via the fair share scheme or the financial inclusion fund, pay for such advice.
	I would also like to speak to new clause 12 and the prepayment issue, which was so eloquently outlined by my hon. Friend the Member for Walthamstow (Stella Creasy). The people who invested in Farepak honestly thought that it was a savings scheme, which should be regulated. My experience of working for a citizens advice bureau is that one of the most difficult things to explain to people is the difference between a deposit and a prepayment. People do not understand the difference; they believe that they are equally protected whether a payment to a scheme is classed as a deposit or a prepayment.
	Indeed, I have seen people in my constituency surgery who have had problems with funeral prepayment schemes, most of which are covered, but some of which are not. I have had grieving relatives come to me and even people who have paid for their funeral, thinking that their family were covered and would not have to worry anymore, who have lost their money.
	The voluntary Christmas prepayment scheme is simply not sufficient. As my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) said, the big supermarkets are not taking part. I wrote to every supermarket, and they said, “There’s no need for us to take part.” However, if they will not take a lead, how can we expect the smaller companies to follow? The scheme needs to be expanded. We need to ensure that people do not fall through the gaps, such as when the Government say, “It’s not this regulation; it’s that regulation,” or, “It’s not in this area; it’s a consumer matter.” The people who suffered because of Farepak do not care where it is regulated; what they need is some regulation.
	Amendment 55, which deals with the money for specialist debt advice, is extremely important. We have heard on a number of occasions that the Money Advice Service does not provide debt advice, and nor should it. It should not be providing people with advice on debt, but putting the matter to the agencies that specialise in it. It is quite understandable, with face-to-face money advice and the financial inclusion fund, that the Money Advice Service should want more cases dealt with. However, there is a perverse incentive, because in being able to deal with one-off cases, the agencies are seeing more people, but giving less advice. The intractable cases, where people really need advice—those involving people who cannot deal with their debts, but need to keep coming back because their creditors keep asking them to—are not being seen. One-off advice is fine for those who can help themselves; indeed, there are a number of people who can be directed to the internet or telephone. My concern is that the removal of legal aid for debt and the Money Advice Service’s inclusion of one-off cases in the financial inclusion fund mean that the people who need ongoing support for long, complex cases are not being seen by the agencies. If amendment 55 is not accepted, therefore, I would urge that those people be considered when debt advice is reviewed.
	Let me turn to amendment 40, which was so eloquently spoken to by my hon. Friend the Member for Walthamstow. I agree that capping the total cost of credit is simply one measure. However, we face an urgent situation. There are many other measures to consider, and I agree with the hon. Member for North Swindon (Justin Tomlinson): roll-overs indeed cause detriment. I have one constituent who has taken out 17 payday loans in one day alone—that is the highest so far; I am still waiting for an improvement on that. As companies have no way of checking in real time whether somebody has taken out any more payday loans, we need a database, run by the regulator so whether somebody has taken out any further loans can be checked, and a limit, whether monetary or numerical. We need to consider that, so I welcome the fact that the Office of Fair Trading is conducting a review. I hope that it will widen that review to include doorstep lenders, such as Provident, which have for so long caused detriment to consumers.
	I would like to mention a case that would be solved by capping the total cost of credit. I had a constituent come to me because she had borrowed £300 from
	Toothfairy. She was a hairdresser. Unfortunately her washer had broken down and she had borrowed that £300 so as not to have to go to BrightHouse and pay its extortionate costs. Unfortunately, however, the hairdressers closed before her next payday—no notice; she lost her job. Over 12 months she had offered instalments to Toothfairy, but the company would not listen to her or accept any instalments. Twelve months on, she went to the citizens advice bureau. She owed £2,570 at that stage, from a debt of £300. She had also received threats from the debt collection agency, which purported to be a bailiff. The company refused to negotiate with the citizens advice bureau, and although the OFT is investigating, there is no action yet. The OFT does not have the power to suspend the company. It is investigating the case, but if it finds that there was consumer detriment, it cannot suspend the company’s licence, and it knows very well that the company will appeal. I cannot believe that there is no consumer detriment in that case, or in the number of similar cases. The OFT or the new regulator must look at the power to suspend. However, capping the total cost of credit would also be a way of doing something urgently to prevent people such as my constituent from getting into such situations.

Lorely Burt: The hon. Lady talks about the OFT not having the power to suspend, but does she agree that the new powers, which the FCA will have, will make it possible to address that?

Yvonne Fovargue: I do not believe that it has yet been confirmed that they will include the power to suspend a company. I would like the Minister to address that. If the FCA has that power and has the resources to act, that would help in cases where the company is breaking all the voluntary codes—it has been proved again that a voluntary code is not working. Again, however, consumers do not look to see whether such companies are regulated; they just need the money. They simply go to the nearest company—possibly the one at the top of the internet or possibly the person or company that sends them an unsolicited text. Consumers do not shop around for such loans.
	Consumers need a robust regulator, and although I welcome the move from the OFT to the FCA in new clause 4, the Government need to clarify what that means for consumer protection. There needs to be a robust deterrent for firms entering the market. The bar needs to be set much higher. There also needs to be a real deterrent. I was therefore pleased to hear the Minister say that the £50,000 limit did not apply and that there could be an unlimited fine, because I believe that £50,000 will quite often be written into the business plan as a write-off. There needs to be the power and, as importantly, the resources to supervise and to stop bad practice at an early stage. Two years down the line is too late for the innocent people who have walked into the trap. We need a real consumer champion. As Which? has often said, what we want is a watchdog, not a lapdog.

Neil Parish: I apologise to the House for not being here at the start of the debate.
	I congratulate the hon. Member for Walthamstow (Stella Creasy) on her amendment 40, because payday loans and doorstep lending are a huge problem. There
	are many loan sharks out there and they need to be put back in their boxes. We need serious financial health warnings about their conduct, so that our constituents have some idea of how much they are borrowing and how much they will have to repay. For instance, anyone borrowing £100 at 2000% will have to pay back up to £2,000. That needs to be clearly laid out when people are taking out such loans. As has been pointed out, APRs—annual percentage rates—are not always understood by our constituents. Therefore, if they could see exactly what they had to repay, they would be much less likely to take out such loans.

Lorely Burt: The point of payday lending is that it should be for a very short period. Such issues arise when there are innumerable roll-overs, as outlined by the hon. Member for Walthamstow (Stella Creasy). What we hope the industry will do and the review will achieve is either to confine roll-overs to a small number or to abolish them altogether, which would address the problem of the £2,000, which no one in this Chamber wants to see.

Neil Parish: The hon. Lady is absolutely right. It needs to be clearly set out when people take out a loan that such sums could be the result if they are unable to repay it. Let us consider the analogy of tobacco. We no longer allow tobacco advertising, and shops cannot even display packets of cigarettes any more, yet people can ring up Wonga on their mobile phone and take out a loan for which they will be charged 4,214% interest.

Stella Creasy: Does the hon. Gentleman agree that, although limiting the number of roll-overs is certainly a step in the right direction, there is a risk that it could result in what has happened in America, where such a limit has led to firms paying off someone’s loan and starting a new one in order to circumvent the regulation? We need a regulation with clear, explicit powers to act in relation to these companies in a way that they cannot shrink away from.

Neil Parish: That is absolutely right. Many of the people taking out these loans earn less than £15,500 a year and therefore cannot afford the loan in the first place. I have sympathy for their position, but are we really helping them by allowing them to get into the hands of loan sharks, which results in their having to pay back huge amounts of money that they simply do not have?
	I have made the point before that if financial companies and loan sharks are arguing that they need to charge huge amounts of interest because people are such a high security risk, they should not be lending them the money in the first place. Let us remember the old adage about finance: these companies will lend us an umbrella when the sun is shining, but they will take it away again as soon as it starts to rain. In the circumstances that we are describing, they should never have made the loans in the first place. Citizens Advice and financial advisers often tell us about people who have got themselves into huge amounts of debt, perhaps through no fault of their own.
	It needs to be made absolutely clear to people what to expect. I am not a great believer in huge amounts of regulation, but I do believe that the consumer should be
	able to see exactly what they are signing up to at the outset, and be made fully aware of the consequences of their actions. They often do not understand the terms if they are hidden in the small print or expressed as complicated percentages, but if they were told, “You can borrow £100, but if you don’t pay it back on time, you could end up paying £2,000 back”, it might make them sit up and think about exactly what they were borrowing. They might then choose not to do it, or to go to someone who could lend them the money at a better rate.
	The Government are doing a great deal to increase the use of credit unions, and we need to do much more work on that. Perhaps we should look into ways of financing them. I have a very successful one in my constituency, and we need to build on that. Only a small percentage of people here borrow money from credit unions, unlike in Ireland, where almost 50% of people have access to such loans.

David Mowat: My hon. Friend mentioned Wonga, and he was right to suggest that 4,000% is an absurd rate of interest. Does he have a view on the rate at which interest should be capped for a fortnight’s payday loan?

Neil Parish: Yes, I do. Many people in the banking sector would probably disagree, but I believe that anything over 50% is far too high. It is obscene and immoral to allow companies to go on charging vast amounts of interest—I do not care who they are—and that is why we have to take action. I am looking to the Government to do so, not only through legislation but through stating that such companies should clearly set out their rates of interest and the consequences of non-repayment, so that our constituents can take advantage of credit that is competitive and that will not ruin them.

Sheila Gilmore: In speaking to the new clauses and amendments in this group, the Minister appeared to say that many of them were unnecessary because the issues would be dealt with through the setting up of the Financial Conduct Authority. However, it is our role as parliamentarians to take up these issues, to state explicitly that we need to give political guidance on the matters that our constituents find important, and to discuss the work that needs to be done by the FCA. There is no reason why these measures should not be incorporated into the Bill. That is surely better than waiting for four or five years, only to discover that the problems have not been addressed because the means of doing so had not been set out as clearly as they might have been. I hope that the Government will therefore reconsider their position on this.
	I am surprised at the way in which the Minister dealt with amendment 55. His objection to its proposals on legal aid and legal advice seemed to be that they would undermine the provisions of the Legal Aid, Sentencing and Punishment of Offenders Bill. Perhaps I have got this wrong, but I had understood that the justification for restricting legal aid was a financial one. We have been given the usual argument that the country is in a financial mess, we have a deficit and we have to save money on the legal aid bill, among many other things. It is therefore disappointing, when someone comes up with another way of financing legal advice for complicated
	cases, that that is not acceptable either. The Government therefore seem to be suggesting that granting legal aid in such cases is, in itself, a bad thing.
	After all, we are not stopping litigation, and we are not preventing people with plenty of money from litigating on any issues. The ending of legal aid will simply result in considerable detriment for people who do not have the money to pay for their legal advice. It is regrettable to say that the proposals would somehow undermine the Government’s intentions. When we were debating the Legal Aid, Sentencing and Punishment of Offenders Bill, various speakers on the Government Benches said, “We would like to do these things, if we had a way of funding them.” They were not saying, “We really do not want to do these things at all.” They seemed to be saying that the measures were being brought in with some sadness, so when someone comes up with a partial solution, it is a shame that we cannot investigate it further.
	Amendment 37 seeks to make it explicit that the work of the Money Advice Service should be to help those with the greatest problems who are suffering particular difficulties as a result of financial exclusion. The previous Government tried to address those problems through various formats. The present Government are suggesting that this will be done anyway, and that the service will be the same for everybody. However, that assumes that everyone is starting off on the same footing, which is not the case. Many people have limited choices and are therefore more likely to get into financial difficulties. The Money Advice Service should be giving those people a specific amount of its attention, and to spell that out in the Bill would not be unreasonable.
	I listened to what the hon. Member for Solihull (Lorely Burt) said about the phasing out of debt management companies. We are not saying that such companies that operate on a commercial basis should disappear. The amendment suggests that it should not be the individual consumer who pays the up-front price for those services. There are alternatives, and some commercial companies could continue to operate if the financial organisations were to foot the bill. We shall be seeking to achieve that.
	Finally, I want to say how important it has been that people have campaigned on these issues; for example, my hon. Friend the Member for Makerfield (Yvonne Fovargue) has campaigned hard on debt management companies, while my hon. Friend the Member for Walthamstow (Stella Creasy) has campaigned on high-cost credit. We are now some considerable time on from when we had a big debate in this place, with many Members attending and speaking on these issues, yet we are so little further forward.
	If we look at the wording of amendment 40, it makes no specific pitch for a particular cap or how exactly to achieve the aim; it simply asks the FCA to make the rule. Further discussion and consultation will be necessary about what those rules should be, but the amendment asks the FCA to make this an important and early part of the work it does. I do not view that as at all unreasonable.
	The alternatives proposed are not good enough. Financial education is fine, but when facing a difficult situation, no amount of financial education is good enough when there is so little choice. Sometimes regulation and financial education are proposed as alternatives, but I do not
	think they are. It would be great if people were better financially educated, but in a tight spot, that is not enough.

Steve Rotheram: One of my constituents wrote to me to say that he thought he had had a particularly good deal because the APR was at 5,200%. He thought that that was better than what the banks were offering, which was obviously just a two-digit figure. Does that not show that financial education is something that this Government need to take on board, because it shows how people get into debt when they do not understand the ramifications of those high interest rates?

Sheila Gilmore: I think financial education is extremely important, but on its own, it will not necessarily equip people to avoid the enticements of the lenders.

Justin Tomlinson: I cannot resist intervening on this specific point. With financial education, consumers can make informed decisions. If people are financially savvy and well financially educated, they can carry out the actions that they would otherwise have to pay a debt management company to do.

Sheila Gilmore: That is indeed the case. I am not suggesting that we should not have financial education. What I am suggesting is that we also need regulation. My hon. Friend the Member for Walthamstow eloquently outlined the various forms that high-cost credit takes, so control over it is also important.

Stella Creasy: I thank my hon. Friend for giving way. Much as I support a good deal of what the hon. Member for North Swindon (Justin Tomlinson) said, I think he misunderstands the situation. Many of my constituents have tried to negotiate, but these companies will not respond to constituents individually as they do not recognise individuals in the negotiation of credit plans, so it is often organisations that have a status—a citizens advice bureau or Christians Against Poverty, for example—who are able to make the breakthrough. That is why these debt management companies are so invidious. They claim the same status as Christians Against Poverty and the citizens advice bureaux, so it is not just a case of being financially savvy; it is also about the having the muscle of a respected organisation behind people. That can cause some of the problems.

Sheila Gilmore: I thank my hon. Friend for that important point of view.
	If we do not take steps to deal with high-cost credit, we will do many people a disservice. I urge the Minister, even at this stage, to support amendment 40. It does not lay down a set of rules, but merely asks the FCA to make the rules an important priority. In order to protect people who will often feel that they have little choice but to use this sort of lending, we need to have controls in place.

Alun Cairns: I am grateful for the opportunity to contribute to the debate and to speak to the amendments. I welcome the Financial Secretary’s opening statement
	on the establishment of the Financial Conduct Authority, and the development away from the Financial Services Authority and the tick-box approach it adopted under the structure set up by the former Administration, which contributed to failures and had a harmful impact on many families and individuals. That is relevant to the responsibilities that the FCA will inherit. We shall now be able to secure an appropriate degree of protection; to promote choice and competition, which are regulatory concerns within the industry; and to protect and enhance the integrity of the UK financial system.
	The powers of product intervention could be considered controversial, but I welcome them and will return to them later. There is a significant difference between the powers of product intervention and the powers of price regulation. I pay tribute at the outset to the hon. Member for Walthamstow (Stella Creasy) for her campaigning. She has been at the forefront of championing the issues and highlighting the injustices of payday loans. I have had constituents come to see me about this, so I fully recognise and understand the sort of difficulties that the hon. Lady and many of her hon. Friends have highlighted. It is also important to highlight the difference between the actions surrounding payday loans and the risk and threat of price regulation to the general banking structure, where there is healthy competition. Even further competition will provide better self-regulation.
	I fear that amendment 40 would send the wrong messages to the whole industry, providing a green light to price regulation—something with which I cannot agree. I shall talk more about price regulation later, but when it comes to product intervention I want to underline why I think that the FCA needs the powers provided in the Bill. I shall highlight one example I have been involved in—the financial scandal of Arch Cru. The FCA’s powers will better enable it to react to such a situation. It can intervene, particularly when a product crosses the jurisdictions of more than one body. It could be the UK and Europe, or the UK and the Channel Islands, or the UK and jurisdictions much further away.
	In exercising those powers of intervention, I hope that the new chief executive of the FCA will be prepared to work with other regulating bodies in the Channel Islands and elsewhere across Europe and beyond, particularly when it comes to cross-cutting products that have become international and products that have been designed to overcome the tighter regulatory structure here in comparison with elsewhere. I view that as essential. Under current legislation, I believe the FSA has the power to play a leading role in resolving some of these issues, but I hope that the new chief executive of the FCA will accept the will and demands of many Members when action needs to take place but has not, as with Arch Cru and others.

David Rutley: My hon. Friend is making a characteristically powerful speech about his concerns about various products and what the FCA should do to move things forward. I am concerned about some of the speeches and interventions from the Opposition, who are trying to be too prescriptive about what the FCA should do with particular products. Clearly, there is a range of issues and concerns, but ultimately we should surely allow the new chief executive of the FCA to take
	the decision based on what he or she feels should be the priority. Does my hon. Friend agree that we should not be too prescriptive?

Alun Cairns: I entirely agree. That is one of my reasons for opposing amendment 40. In my view, it will not achieve what it sets out to achieve, but will have far-reaching consequences for not only the FCA but consumers and providers.

Stella Creasy: Will the hon. Gentleman give way?

Alun Cairns: I will give way to the hon. Lady, and I trust that I shall then have a chance to respond to her question.

Stella Creasy: Will the hon. Gentleman enlighten the House on his concern about the expertise of the FCA and its ability to exercise the powers granted by the amendment? The amendment simply gives the FCA those powers; it does not direct it to use them automatically. I should also like to know why he was concerned by what the Minister said earlier about his support for the use of price regulation.

Alun Cairns: There are clauses that allow for product intervention and refer to terms and conditions, but that only underlines the fact that amendment 40 is not necessary. I do not understand the inconsistency. I am also worried about the reference to maximum pricing in the amendment. If it were passed, price regulation would be introduced to the financial services sector for the first time, because banking services are currently based on variable cost. Many products are intended to remove the risk from the consumer, and the risk is priced accordingly. Price controls could not accommodate changes and fluctuations in the marketplace. The amendment poses a major threat to the supply of valuable products to many consumers, to the free market, and to competition principles.
	Direct pricing also poses the threat of practical consequences. How would the FCA determine the price of a product? One of my hon. Friends said that he considered 50% to be appropriate, but some Members are now shaking their heads, suggesting that that might be too high. How would the FCA decide whether the basis of pricing should be fixed or variable? What about the cross-subsidies that are arranged within financial institutions with the aim of securing the financial certainty that many consumers demand? What about the long-run incremental costs? It would be impossible to price products accordingly; but even if that were a solution, it would require a large-scale, sophisticated infrastructure body to provide continual oversight of the hundreds of products provided by hundreds of organisations.
	For those reasons, I oppose amendment 40. In the same breath, however, I pay tribute to the campaigning that has highlighted the scandal of payday loans, and to the Treasury, which has responded accordingly. We have already heard that there will be a report by the end of the summer, and that it will be acted on. I hope that those who share the concern expressed by the hon. Member for Walthamstow about payday loans will be reassured by what has been said not only by Ministers but by Back Benchers, who will maintain the pressure for action.

Mark Hoban: This has been a thoughtful and helpful debate, which has raised a number of issues.
	The hon. Member for Nottingham East (Chris Leslie), who is not in the Chamber now, asked what would happen next. The powers to transfer consumer credit regulation can be used only when the Bill has received Royal Assent and the new regulator is up and running. A good deal of work is being done. We are examining the perimeter and nature of regulation, and are working closely with the industry and consumer stakeholders who are advising us. We expect to consult formally on the secondary legislation effecting the transfer, and on an impact assessment of our proposals, early in 2013. The transfer will then be subject to the affirmative procedure and the approval of both Houses of Parliament. That does not, of course, mean that the OFT is now a lame duck regulator. It is looking hard at various aspects of various aspects of detriment to consumer credit, and is trying to do the best possible job to protect the interests of consumers.
	The hon. Gentleman—who has now returned to the Chamber—asked what role would be played by trading standards authorities. One of the Government amendments deals with that. Trading standards authorities, known more colloquially as weights and measures bodies, play a role in the enforcement of the current consumer credit regime, and I expect that to continue. The precise nature of their role will be governed by the consultation to which I referred earlier.
	A number of Members asked what the OFT was doing now to regulate the high-cost credit sector. I was asked about affordability checks, about rolling over, and about unfair treatment of borrowers who find themselves in financial difficulty. The OFT is focusing on all those issues. It intends to engage in on-site inspections of about 60 major payday lenders, and in compliance work alongside trade associations and others. It is also paying close attention to the advertising of high-cost credit, and is examining a number of the websites operated by providers. It has highlighted a number of areas in which advertising practices need to be improved, and its final report will be published later this year.
	Members have bandied around a figure of 18 months in connection with the research that is taking place. In fact it was commissioned last July, and the process has yet to reach its first anniversary. Members may be confusing that research with the broader review following consultation on consumer credit, or with the personal insolvency review that we launched in October 2010. Voluntary action is already being taken to tackle some of the incentives offered by the store card sector. I think that we should await the publication of the report.
	As the Bill will give the FCA powers to intervene in relation to interest rates, I think that the aim of amendment 40 has already been achieved. The FCA’s new product intervention power will enable it to act more quickly and decisively when it considers that a product, or product feature, has the potential to cause significant detriment. It is a broad power, which I think is helpful. As has been established, a range of interventions can be made. The FCA can impose requirements on products as well as banning them outright, and can make rules on charges and on specific product features, including the duration of a contract.

Stella Creasy: There is genuine concern about the view of lawyers that unless the power is explicit, it will be open to challenge. Will the Minister publish the legal advice that he has had to the contrary, supporting his assessment that the power in amendment 40 could enable prices to be capped as part of action on consumer detriment?

Mark Hoban: I am certain that the FCA’s broad range of powers will enable it to do that. It can use its powers in pursuit of its consumer protection objectives. However, those are not the only powers that are available.
	The hon. Member for Makerfield (Yvonne Fovargue) asked whether the FCA would be able to suspend permission with immediate effect. Under new section 55Y, it will be able to vary the permission of a firm, or to impose a requirement on a firm with immediate effect if it considers that to be necessary. We will consider whether the OFT should be given the same powers in the interim.
	A helpful question was asked about the asymmetry between the information given to lenders and that given to borrowers, and about whether a cash illustration could be provided alongside information about the annual percentage rate. The consumer credit directive requires the costs of credit to be specified in terms of the APR. The Commission will review the directive in 2013. We have ensured that there is a new “with regard to” provision for the FCA—something else that it must consider when it seeks to secure an appropriate degree of protection for consumers. Consumers must have timely provision of information, and that advice must be accurate and be fit for purpose in the eyes of the consumer, not those of the provider of the service. We will consider whether a provider of consumer credit should quote an indicative cash cost alongside the APR.
	New clause 10, tabled by the hon. Member for Nottingham East, proposes that potential interest rate changes and their costs be included. I do not think that is necessary as rules are in place. I have mentioned that there is a new power in the Bill enabling the FCA to require providers to supply adequate information that is fit for purpose. A number of lenders already provide information to borrowers about the impact of rate changes. People who come off a fixed-rate mortgage will get information to help with that from their lender.
	The mortgage market review is currently out to consultation. One of its provisions requires lenders to think about the impact of interest rate increases on the ability of borrowers to service their mortgage debt. That is a helpful move, because the hon. Gentleman was right to make the point that interest rates could increase and that that could have an impact on family finances. Tools should be available to help families to budget and to think about the impact of mortgage rate changes. Lenders should ensure that that is easily accessible, and the Money Advice Service and others operating in this field should ensure that calculations or ready reckoners are in place. I do not think provision for that is needed in the Bill, but I do think it is an important topic that we must consider.

Christopher Leslie: I welcome the Minister’s comments. Setting aside whether he thinks the new clause should be added to the Bill, he seems to be saying that he agrees
	it would be a good idea in principle to encourage all banks and other lenders to engage in some sort of forewarning of customers. Does he agree that if he says that is a good idea and the Opposition think it is a good idea, that sends a signal to the new regulator to make that a priority?

Mark Hoban: I do not think this needs regulatory action. I think it is in the interests of lenders to provide the right information to their borrowers to enable them to plan ahead, however, because it is not in the interests of lenders for borrowers to fall into arrears as a consequence of increases in interest rates. That is why it is important that potential changes in interest rates are considered in lending decisions and that information is available to help borrowers to think about the impact on their circumstances of changes in interest rates. I do not believe that is necessarily a regulatory matter; rather, I think it is in the interests of firms and their borrowers that such information be available.
	On the issue of consumer credit, I do not think amendment 40 is necessary. The Treasury is confident that a range of powers is in place to help people in respect of payday lenders and high-cost lenders. I do not believe new clause 10 is necessary either, but I think it is in the interests of lenders to ensure that the information in question is available.
	On new clause 12, the hon. Member for North Ayrshire and Arran (Katy Clark) spoke very powerfully about the Farepak issue and how to protect such consumers in future. We must recognise, however, that there is a cost attached to any additional protections for consumers, and that it will, to some degree at least, be borne by consumers.
	The question of the regulation of prepayments is complex, as was evident from the work done by the previous Government after the publication of the “Pay now, pay later” report by Consumer Focus. There are no simple solutions, particularly when we want to ensure that vulnerable consumers or those on low incomes can still access the goods and services they want. Introducing some form of set-aside or ring-fencing of funds or some form of insurance in order to be able to compensate consumers in the event of an insolvency can impose significant additional costs on businesses and therefore potentially on consumers. Several industry sectors have concluded that the gains from increased consumer confidence outweigh the costs, however, and have gone ahead with sector schemes. We will continue to monitor this topic. My hon. Friend the Member for Solihull (Lorely Burt) asked who was the right Minister to pursue in this regard: I suggest it is the Minister responsible for consumer affairs, the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for North Norfolk (Norman Lamb).
	The hon. Member for North Ayrshire and Arran also asked about credit hierarchy. That is an important subject, and I am very conscious of delays in making payments to the Farepak creditors. We must, however, bear in mind the fact that one of the aims of insolvency law is, as far as possible, to achieve an equitable distribution among the unsecured creditors. Those unsecured creditors could, of course, include small suppliers for whom the debt from a prepayment scheme could result in the failure of their business. There is therefore a difficult balance to strike.

Katy Clark: What is different about this situation, however, is that often the reason for prepayment is that the person buying the product wants to purchase in that way because of their financial situation, and the person selling the product gets the financial advantage of holding that money for a period of time. I therefore cannot understand the Minister’s point, in that at present the advantage is with the organisation selling the product. Does the Minister agree that we should be considering how to move towards a situation in which the consumer is able to pay in this way and get protection for the funds they have paid out?

Mark Hoban: The hon. Lady makes an important point. It is my understanding that some of these prepayment schemes get their income from being able to negotiate a discount with the supplier of the goods, as well as, perhaps, from the interest they earn on the prepayments. The question then arises whether the revenue the prepayment scheme gets is sufficient to outweigh the cost of enhancing customer protection. Some of these schemes are administratively expensive, and the cost of protection may exceed the income generated, which would lead to that service being withdrawn from the consumer.
	As this exchange demonstrates, some complex issues are involved. The hon. Lady is right to raise them, and it is right that the Government should continue to address them. Many people rely on these schemes and it is important that they are well protected. We should make sure that there are alternative sources of information for them, in order to enable them to judge where they might get best protection and, perhaps, earn some interest themselves on the prepayment they are making, rather than the supplier making that money.

John McDonnell: Both of the issues under discussion have cross-party support. There is a consumer affairs element in them, and this kind of legislation comes around very rarely. Indeed, I doubt whether we will see such an all-encompassing Bill for another decade. There does not appear to be any consumer legislation in the planned Queen’s Speech, other than the proposed groceries adjudicator Bill. Will the Minister therefore reconsider these two matters, and meet the relevant Members to see whether there is any way they could be better addressed in this Bill before it goes to the other place or before the final vote on it?

Mark Hoban: I think that there is adequate provision in the Bill on consumer credit; the FCA has the powers to tackle that issue and I am confident that it will be able to make appropriate use of the remedies available to it. A different issue about pre-payment schemes has been raised, but that does not fall within the scope of the Bill. Of course there is a mechanism in the Bill to move the regulatory perimeter if appropriate, but I think that it is the Minister with responsibility for consumer affairs who needs to respond on that point.
	I know that we want to move on to deal with the next group of amendments, but before concluding I just wish to say that there is support across the House for new clause 4, which enables us to complete the transfer of regulation from the OFT to the FCA. That does yield important benefits for our constituents. We need to get that regime right if we are to ensure that there is a
	reasonable supply of affordable credit to our constituents and that they are well protected—that is the goal we are all aiming at. The Bill contains the powers to do that, and I commend new clause 4 to the House.
	Question put and agreed to.
	New clause 4 accordingly read a Second time, and added to the Bill.

New Clause 1
	 — 
	Retrospective reviews of Bank performance by court of directors and publication of court minutes

‘(1) Section 2 of the Bank of England Act 1998 (Functions of court of directors) is amended as follows.
	(2) After subsection (5) add—
	“(6) The court shall conduct retrospective reviews of the performance of the Bank with respect to its functions and objectives.
	(7) The court shall determine the particular matters to be reviewed under subsection (6).
	(8) The court must publish a report on each review carried out under subsections (6) and (7) unless the court decides that all or part of such a report should not be published for reasons of confidentiality or because it would endanger financial stability.
	(9) When all or part of a report of a review is not published under the provisions of subsection (8), the court must—
	(a) publish as much as possible of the report,
	(b) send a copy of the full report to the Chairman of the Treasury Committee of the House of Commons or, in exceptional circumstances, inform the Chairman of the Treasury Committee of the reasons for not sending it, and
	(c) publish the report or part of the report as soon as possible after the court decides that the considerations in subsection (8) no longer apply.
	(10) After each meeting of the court, the Bank shall publish minutes of the meeting before the end of the period of two weeks beginning with the day of the meeting.
	(11) Subsection (10) shall not apply to minutes of any proceedings where the court has decided that publication should be delayed for reasons of confidentiality or because publication would endanger financial stability.
	(12) Where any part of the court’s minutes is not published under the provisions of subsection (11), the Chairman of the court shall inform the Chairman of the Treasury Committee of the House of Commons of the reasons.
	(13) Any part of the minutes of a meeting of the court must be published as soon as the court has decided that the considerations in subsection (11) no longer apply.”.’.—(Mr Tyrie.)
	Brought up, and read the First time.

Andrew Tyrie: I beg to move, That the clause be read a Second time.

Nigel Evans: With this it will be convenient to discuss the following:
	New clause 2—Reports by skilled persons —
	‘The Financial Services and Markets Act 2000 is amended as follows—
	“(1) In section 166, subsection (1), leave out “require him” and insert “inform that person that it has appointed a person”.
	(2) In section 166, subsection (1), at end insert “The Authority may require the person to whom subsection (2) applies to pay for the costs of the report in the event that it has resulted in enforcement action being taking against that person.”.
	(3) In section 228, subsection (5), at end insert “except that this is without prejudice to the right of the complainant to sue for any amounts in excess of the maximum award limit in the event that the Ombudsman has made a recommendation pursuant to section 229(5) of this Act. The Complainant’s acceptance is also not binding on the Authority which remains entitled to take such action as it would have been had the award limit not existed.”.’.
	New clause 3—Enforcement of money awards —
	‘Schedule 17 of the Financial Services and Markets Act 2000 is amended as follows—
	“(1) In paragraph 16, leave out “which has been registered in accordance with scheme rules”.’.
	New clause 13—Meaning of qualifying parent undertaking: assessment and review —
	‘(1) The Treasury shall within twelve months of Royal Assent to this Act consult the FCA and the PRA on the possible need to exercise the powers provided for by section 192B(6)(a) of the Financial Services and Markets Act 2000 and shall lay before the House of Commons a report containing an assessment of the need to exercise these powers.
	(2) In subsequent years, the FCA and the PRA shall provide an annual assessment of the possible need to exercise the powers provided for by subsection (6)(a), to be reviewed by the Treasury. Any such review must be laid before the House of Commons.’.
	Amendment 46,in clause 1, page1,line12, at end add—
	“(2A) The appointment of the Governor and Deputy Governors shall be made only after the Treasury Committee of the House of Commons has been consulted and has reported on the suitability of the candidates nominated by the Chancellor of the Exchequer for the posts.’.
	Amendment 47,page1,line12, at end add—
	“(2A) Any member appointed under subsection (2) shall be appointed with the consent of the Treasury Committee of the House of Commons.’.
	Amendment 29, in clause 2,page2,line11, after ‘Authority)’, insert
	‘and shall have regard to minimising, as far as possible, the use of public funds to support or rescue parts of the UK financial services industry.’.
	Amendment 22,in clause 3, page3,line37, after ‘functions’, insert
	‘having regard to the economic policy of Her Majesty’s Government, including its objectives for growth and employment’.
	Amendment 23,page8,line32, at end insert—
	(a) If the Treasury considers it appropriate to proceed with the making of an order under section 9K, the Treasury may lay before Parliament—
	(i) a draft order, and
	(ii) an explanatory document.
	(b) The explanatory document must—
	(i) introduce and give reasons for the order,
	(ii) explain why the Treasury considers that the order serves the purpose in section 9K, and
	(iii) be accompanied by a copy of any representations received from the FPC or the Governor.
	(c) The Treasury may not act under paragraph (a) before the end of the period of 12 weeks beginning with the day on which the consultation began, unless the order is made in accordance with paragraph (b).
	(d) Subject as follows, if after the expiry of the 40-day period the draft order laid under paragraph (a) is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
	(e) The procedure in paragraphs (f) to (i) shall apply to the draft order instead of the procedure in paragraph (d) if—
	(i) either House of Parliament so resolves within the 30-day period, or
	(ii) a committee of either House charged with reporting on the draft order so recommends within the 30-day period and the House to which the recommendation is made does not by resolution reject the recommendation within that period.
	(f) The Minister must have regard to—
	(i) any representations,
	(ii) any resolution of either House of Parliament, and
	(iii) any recommendations of a committee of either House of Parliament charged with reporting on the draft order, made during the 60-day period with regard to the draft order.
	(g) If after the expiry of the 60-day period the draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
	(h) If after the expiry of the 60-day period the Minister wishes to proceed with the draft order but with the material changes, the Minister may lay before Parliament—
	(i) a revised draft order, and
	(ii) a statement giving a summary of the changes proposed.
	(i) If the revised draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the revised draft order.
	(j) For the purposes of this section an order is made in the terms of a draft order or revised draft order if it contains no material changes to its provisions.
	(k) In this section, references to the “30-day”, “40-day” and “60-day” periods in relation to any draft order are to the periods of 30, 40 and 60 days beginning with the day on which the draft order was laid before Parliament.
	(l) For the purposes of paragraph (k) no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than four days.’.
	Amendment 24,page12,line2, at end insert—
	‘(f) an assessment of the impact of each macro prudential measure on employment and economic growth.’.
	Government amendment 12.
	Amendment 39,in clause 4, page14,line36, at end add—
	‘Within a year of commencement of this Act the Bank of England shall publish a review of the effectiveness of co-ordination by the regulators of the exercise of their functions relating to membership of, and their relations with, the European Supervisory Authorities (namely, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority), and their relations with other regulatory bodies outside the United Kingdom.’.
	Amendment 28,page15,line4, leave out clause 5.
	Amendment 35,in clause 5, page16,line15, at end insert—
	‘(c) the ease with which consumers, particularly those on lower incomes, can have access to financial services and products which are affordable and appropriate to their needs.’.
	Amendment 67,page16,line41, after ‘is’, insert
	‘intelligible to them, appropriately presented’.
	Amendment 41,page17,line1, after ‘transaction’, insert
	‘, any common law fiduciary duties owed by the provider in question’.
	Amendment 68,page17,line35, at end insert—
	‘(e) the ease with which consumers throughout the UK can identify and obtain services which are appropriate to their needs and represent good value for money.’.
	Amendment 69,page27,line19, at end insert ‘and by the Consumer Panel’.
	Amendment 70,page27,line19, at end insert—
	‘(1A) Unless the PRA has established a panel as provided for in section 2K(2) to reflect consumer interests, it must consider representations from the Consumer Panel established under section 1Q where such representations relate to the PRA’s general policies and practices, the co-ordination of the exercise of PRA and FCA functions as provided for in section 3D(1), or the exercise of the PRA power in section 3I.’.
	Amendment 34,page28,line38, at end insert
	‘to minimise unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close co-ordination.’.
	Amendment 36,page29,line15, at end insert—
	‘(g) the principle that, where appropriate, authorised persons should have a fiduciary duty towards the consumers who are their clients.’.
	Amendment 71,page29,line42, at end insert—
	‘(d) that each regulator engages with the other where they identify any gaps in or between their regulatory remits, or the exercise of these, that may become apparent in relation to any product, provider, institution, market practice, responsible shareholder interest or consumer concern;
	(e) that as appropriate both regulators can identify areas where they can share services and information, acting to minimise burdens on firms supervised by both regulators and/or to maximise the understanding of consumers and facilitate the exercise of their responsible interests.’.
	Amendment 33,page31,line24, at end insert—
	‘(8A) The memorandum shall contain an estimate of the additional annual costs involved in the administration of the FCA and PRA when compared with the estimated costs of the administration of the Financial Services Authority.’.
	Government amendment 1.
	Amendment 42, in clause 25, page108, leave out lines 29 and 30.
	Amendment 43,page108, leave out lines 34 to 39.
	Amendment 49,in schedule 3, page174,line1, at end insert
	‘with the consent of the Treasury Committee of the House of Commons.’.
	Amendment 50,page174,line2, at end insert
	‘with the consent of the Treasury Committee of the House of Commons.’.
	Amendment 27,page176,line9, at end insert—
	‘Publication of minutes and agendas
	10 The FCA shall make arrangements to publish the agendas and minutes of its meetings, unless publication would be inappropriate.’.

Andrew Tyrie: As a number of colleagues across the House will have noticed, the Treasury Committee took the highly unusual step of tabling a new clause, which is signed by all but one member of that Committee. As
	hon. Members will be aware, the Committee feels strongly that this Bill is defective in a number of respects, and needs a good deal of attention and improvement. That is because the Bill will hand the Governor of the Bank of England
	“unprecedented new powers to shape the British economy. While continuing to set interest rates, the Bank will take over the supervision of commercial banks and insurers, be responsible for…tackling threats to financial stability…and have the power to restrict lending on mortgages, or order banks to increase their capital…one…man or woman will wield all these powers. This individual will arguably be as powerful as the chancellor”.
	As drafted, the Bill seems to fly
	“in the face of all ideas of modern governance, let alone parliamentary accountability.”
	Those are not just my personal views; they summarise reasonably well the views of the whole Treasury Committee. As it happens, I have not said anything off my own bat yet; everything that I have said so far is a verbatim quotation from an article by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling).

Mark Field: I entirely endorse what my hon. Friend has said. May I also say, in my role as the Member for the City of London, that although I am not suggesting for one minute that the views he has just espoused are universally held within the square mile, many practitioners have deep concerns about elements of the Bill, particularly the aspects to which he has referred?

Andrew Tyrie: I have heard a good number of those concerns from the practitioners to whom my hon. Friend refers. What they say, what he has just said and the fact that I was quoting a former Chancellor all illustrate an important point: new clause 1 is not just supported by the Treasury Committee and by many independent experts who have taken a look at it. My impression, which has been gained from talking to fellow MPs and many others, is that the purpose behind the new clause is supported right across the House of Commons.
	New clause 1 would bolster parliamentary accountability in two ways. First, it would place a duty on the court of directors to conduct retrospective reviews of the Bank’s performance and publish the results for Parliament to examine. Secondly, it would require the court to publish its full minutes. Those two suggestions sound, to me at least, pretty reasonable, but they encountered a wave of objections from the Bank. The Bank’s frequent refrain to us has been that the current accountability arrangements are pretty much okay just as they are. We need to be clear that the current arrangements for the court simply will not do. The board of the Bank—the court—is currently prohibited from examining the Bank’s performance and it cannot make recommendations about what it may discover if it does ask any questions. The court’s role is strictly confined to process—mainly to auditing the budget. Any well-governed institution must have a board capable of examining its performance and permitted to comment on how to learn lessons from mistakes or from successes. That is why we propose that the court be required to conduct and publish reviews of the Bank’s policy. Of course that would also give Parliament an opportunity to make recommendations on what it should look at.
	It is astonishing that the Bank has still not conducted and published a review of its own performance during the 2007-08 crisis. The Financial Services Authority and the Treasury have done this, enabling both to face up to weaknesses in organisation and performance, and to work out how to remedy some of them. The Bank should have done the same some time ago, and the fact that it has not done so tells us that the court seems to owe more to the dignified than the effective part of the Bank’s constitution.
	What can I say about the Government’s position on all this? I find their position to be off beam—let us leave it at that. Their response to the Treasury Committee report states that
	“the Government considers that the governance of the Bank should primarily be a matter for the Bank itself.”
	It must be clear to most people that the Bank cannot be left to decide how it can be made accountable, as it is an interested party. This is the one issue, above all, that Parliament certainly should not leave to the Bank, and nor should the Treasury do so. After all, the Treasury is its 100% shareholder; it is legally responsible for the Bank’s accountability.
	None the less, the Government and the Bank have both begun to shift their respective positions, albeit only under pressure. It is just a pity that a move towards common sense is being wrung as blood from a stone. First, the Bank conceded that some form of oversight sub-committee could be created but it maintained that such a committee should not have the power to examine the merits of decisions and should not have the authority to commission internal reviews. Now, more helpfully, the Financial Secretary has edged a bit closer to the Treasury Committee’s position by saying that the sub-committee could commission retrospective internal reviews. What we now need to do is give statutory effect to all this, rather than rely on pledges. We need to ensure that the court can look at the merits of decisions and that it is accountable to Parliament for doing this work. We need to have that put in the Bill. That, in a nutshell, is what new clause 1 would achieve.
	The second part of new clause 1 would require the court to publish its minutes, as the Monetary Policy Committee already does, subject to some specific confidentiality concerns. The Treasury Committee finds the notion that that might be inappropriate a little strange to say the least. It must be right for Parliament to have at least that measure of transparency in respect of the affairs of the Bank. It is very disappointing that we have been asking the court for its minutes for the period of the crisis for more than a year and still have not received them—that simply will not do. The fact that we have not been given those minutes only illustrates the need for a statutory duty of accountability on this unprecedentedly powerful institution.

Mark Field: Given that, as my hon. Friend puts it, we are dealing with an unprecedentedly powerful institution, would he care to speculate as to why there has been this reluctance, in the face of repeated requests from the Treasury Committee, on the part of the Bank of England to do as he has asked?

Andrew Tyrie: My hon. Friend tempts me towards a place I would very much enjoy going, but—in the interests of I cannot think what; let me suggest brevity, or something like that—I will not go there.
	There has also been a concession on the minutes, but it goes somewhat short of what is appropriate. The concession is that a record of court meetings will be published—I am citing the phraseology used—but it seems to me that that will not do either. The court should publish full minutes, not doctored minutes. I do not want to sound too pejorative, but the minutes should not be written especially for the purposes of a certain type of scrutiny by Parliament. The full minutes should be published, as is the case with the Monetary Policy Committee, subject to the confidentiality provisions to which I alluded earlier.
	New clause 1 addresses only a small part of what is needed to knock this Bill into shape. Much more time should have been devoted to it. The need for all this to be on the statute book by the end of this year is yet to be explained to us. It would be far better to let the timetable slip for a few months and to get the Bill right. The crisis has afforded us a once-in-a-generation opportunity to overhaul the legislation and the Bank and it seems to me that we are not fully taking it up.
	It is also regrettable that all this work is being done in the form of amendments to the Financial Services and Markets Act 2000, which is itself an immensely complex piece of legislation. As the Governor of the Bank argued before the Committee and elsewhere, we would have done better to write a new Bill from scratch, but we were told that that would take too long. Again, there is a rather curious interaction between trying to get something right and the arbitrary timetable that is imposed.
	I very much hope that the other place will get to grips with some of the other shortcomings of the legislation, many of which are relevant to amendments in this group. Let me list a few. The first is the effect on the accountability and governance of the complex web of interacting committees that are in place or being created—the FPC, the MPC, the Prudential Regulation Authority, and the sub-committee, NedCo, in particular. The second is the need for stronger accountability to Parliament as regards macro-prudential tools, and I note that amendment 23, tabled by the hon. Member for Nottingham East (Chris Leslie), addresses that issue—intelligently, if I may say so. The third is the heavy circumscription of the powers of the Chancellor to intervene in a crisis, which will, I understand, be addressed on day two on Report. More work is certainly needed to get this legislation right. The fourth is the need for Parliament and the Treasury Committee to engage in the process of the appointment of a new Governor, which has been in the papers over the past few days and is dealt with by amendments 46 and 47, tabled by the hon. Member for Hayes and Harlington (John McDonnell). The fifth concerns the FCA, which seems to be the poor relation in all this legislation, and a similar duty to publish minutes and conduct reviews of its work. That is touched on in amendment 27, tabled again by the hon. Member for Nottingham East.

Andrea Leadsom: Does my hon. Friend agree that it is also regrettable that the FCA, despite another request from the Treasury Committee, does not have a statutory primary objective to promote competition in the banking sector? The Committee has been calling for that ever since this inquiry started.

Andrew Tyrie: I am grateful for that support from my Committee colleague. Competition is now one of the operational objectives, but the punch of the FCA’s three operational objectives has been diluted by the fact that an overarching strategic objective has been placed above them, and it could be used to trump the operational objectives and enable the FCA to avoid a primary duty to take account of competition. I completely agree with my hon. Friend.
	The PRA veto on the FCA’s work as a whole is another issue that the Committee has raised from time to time, but I must admit that it is not covered by this group of amendments. I shall therefore move on swiftly before I am ruled out of order.
	It is now common ground that the proposed governance and accountability of the Bank and the FCA are defective and need to be strengthened. The Committee is determined that they should be strengthened. We regret that they are not already in much better shape, and there is a great deal of work for the other place to do to the legislation. As a Committee, however, we showed by our decision on the need to obtain a full explanation for RBS’s failure that we would not hesitate to take new steps in order to get information that we think should be in the public domain. We took the unprecedented step in that case of sending specialist advisers into the FSA to conduct a full investigation. It should be made clear now that we will not hesitate to do the same with respect to the Bank of England if this legislation remains defective. Sending in specialist advisers was a somewhat cumbersome route to getting to the facts of the RBS issue, and it would be far preferable to improve the Bill so that such action by the Committee would no longer be necessary.
	The bottom line for improving Bank accountability, to its own board and to Parliament, should be judged by two criteria. First, does the proposal hold out the prospect of improving the performance of the institution—that is, the quality of public policy? Secondly, does it help secure public consent for the decisions that that body takes? The latter is particularly important for an institution as powerful and as remote, in many respects, as the Bank of England. The Committee believes that new clause 1 would meet both those criteria and I commend it to the House.

Christopher Leslie: I thank the hon. Member for Chichester (Mr Tyrie)—or is he right honourable? If he is not, he should be. I thank him for his eloquent and powerful advocacy of new clause 1. The Treasury Committee has done sterling work in trying to cajole and persuade the very reluctant Bank of England to move from the 18th century to the 19th century. If we could speed things up a little through his new clause, that would certainly be welcome. The hon. Gentleman is not exactly asking for the moon on a stick; he is simply asking for the publication to a reasonable degree of the minutes of the court of the Bank of England—shock, horror—and for proper internal scrutiny in the Bank and a review of how it has performed. The hon. Gentleman is entirely correct that it is appalling that the Bank of England has never conducted a review of its role in the 2008-09 crisis. Every other branch of government, including the FSA, has done similarly and I would have thought that such a review would be a pretty basic prerequisite for moving on, especially if we are moving to a new era
	when the Bank of England will be incredibly powerful thanks to the great news powers that the Government wish to bestow on it.
	The Bank of England is an old institution. It started life in 1694 with just 17 clerks and a couple of gatekeepers, and it has subsequently been modernised by a number of Acts of Parliament. It is time, however, for it to become less of an honorific institution. The court should be made up of individuals who really take seriously the responsibility to scrutinise the performance of the executive of the bank, and the hon. Member for Chichester made his points perfectly well. As he says, it is like getting blood out of a stone. Some sort of oversight committee might, as the Minister said in Committee, be able to conduct retrospective reviews. The hon. Member for Chichester is entirely correct that it is ridiculous for only a record of the minutes to be published.
	I will support the hon. Gentleman’s new clause, if it comes to it, but I suppose we should wait to hear what the Minister has to say. I shall not dwell on the new clause, though, as the group includes many other amendments which address a range of issues on the governance of the Bank of England and the new regulatory structures, and we have a very short space of time in which to debate it. I have, I think, 11 amendments in the group. I will not dwell on them all; I will focus on the key ones.
	Amendment 22 would insert a responsibility on the FPC of the Bank of England, requiring it to have regard to the Government’s economic policy, including their growth and employment objectives. That is not an enormous requirement. The Bank of England Act 1998 gave the Monetary Policy Committee the same responsibility when making its decisions on monetary policy, and many central banks across the world, including the Federal Reserve, have to have regard to those important matters. We know that growth is flatlining under this Government and that they have a significant blind spot for the motor that we have to get going if we are to generate the revenues needed to kick-start the economy, but setting aside their political unwillingness to tackle the growth deficiency in our economy, there is also a major crisis of unemployment. If ever there were a time to ensure that these new and powerful institutions were focused on job creation, this is it.
	It is simply inadequate for the Minister to point to the part of clause 3 that states that the FPC is not authorised
	“to exercise its functions in a way that would…have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy”.
	That is not a significant protection—it is weak and caveated. We need the FPC to have proper regard to the impact its decisions can have, positively and proactively, on jobs and growth. That is why we tabled amendment 22. It is not something just dreamed up by the Opposition; the pre-legislative scrutiny Committee, some of whose members are here this evening, recommended that the measure be in the Bill. The FPC must be made to think about the impact of its decisions on the real economy; otherwise, it could become obsessively risk-averse and start to stifle credit availability.

David Rutley: There is a sense of déjà vu, as the Bill Committee spent a lot of time debating this measure. The hon. Gentleman talks about what he perceives is
	the present Government’s blind spot, but the previous Government’s was clearly a regulatory system that was woefully inadequate to cope with the challenges that came its way and was found wanting. What the Bill aims to address is financial stability and to make it a core focus. Why does he want to diffuse the focus at a time when the key element we have to tackle is financial stability? Government policy more generally tackles what he wants.

Christopher Leslie: This goes back to the odd statement from the Minister in Committee, when he said it would be wrong for the Bank of England and the FPC to be asked to have regard to the impact of its decision on economic growth and employment. I ask the hon. Gentleman to pause and reflect on what he is saying, which is that it is not the Bank’s and the FPC’s job to think about jobs and growth. If he goes to his electorate and says that that is what he is legislating for, I doubt he will get much of a response, but it is important. The FPC will be a vital player in our economy. The Monetary Policy Committee has this objective in its remit; it seems only reasonable to have it mirrored in the Financial Policy Committee’s remit.
	This attitude, which we called the Fareham doctrine of compartmentalism, that it is for the Treasury alone to think about jobs and growth—that it would be wrong and somehow dangerous for the Bank of England to think about such issues too—is an extremely dangerous way to think about this vital and extremely powerful institution. The Chair of the Treasury Committee said that, in certain ways, the Governor of the Bank of England could become even more powerful than the Chancellor of the Exchequer. I want all the players in our economy to be thinking about the impact of their decisions on our constituents, their employment prospects, their business prospects and the prospects of growth.
	I think the amendment should be made. It is exceptionally important, and I feel strongly that we should press the matter. In a sense, it is similar to amendment 24. In the Bill, we enter new verbal territory with descriptions of how policy will be made. I know that many Members are intimately familiar with macro-prudential regulation, but essentially, it is that suite of rules and powers that the Bank of England and the FPC will be able to use to intervene in their systemic oversight of the economy as a whole. We suggest simply that every time the Bank of England produces a financial stability report it should give an assessment of the impact that each of the new macro-prudential measures will have on employment and growth—a simple assessment of their impact on the real economy. As the Bill stands, there is no requirement on the Bank of England, when exercising those massive powers, to provide that assessment. As the House knows, in many policy areas, we require frequent regulatory impact assessments to be made; this is a parallel requirement. We want the Bank of England properly to analyse the impact of the measures.
	Let me give hon. Members some examples, so that they understand what macro-prudential regulation is. It is about setting maximum leverage ratios; sectoral capital requirements; rules on the terms of or the conditions on a loan, either to businesses or to consumers; loan-to-value ratios and loan-to-income ratios in mortgages; haircuts
	on secured finances or derivative transactions; disclosure requirements; and minimum credit card repayment levels. All those things are of real and great concern to our constituents. If the FPC and the Bank are able to assess the impact of their policies on credit availability, they should also be able to assess and analyse their impact on jobs and growth. Amendment 24 would achieve that.

David Mowat: I thank the shadow Minister for his lecture on macro-prudential tools. I was on the Joint Committee and I certainly did not recommend the inclusion of a growth objective, because I believe that stability and growth are potentially competing objectives. We are passing the Bill because of what happened in October 2008. I was concerned that anything that diluted the absolute requirement for stability might give an excuse for failure, which I did not want to arise.

Christopher Leslie: It was the Chancellor of the Exchequer himself who warned against the stability of the graveyard. We have to have joined-up Government and co-ordinated economic policy—I hope hon. Members accept at least that much. It should not be impossible to ask the Bank of England simply to have regard to Her Majesty’s Government’s strategy—not the Opposition’s; obviously, ours would be different—and objectives on growth and jobs. That is all we are saying. We are not saying that that should overrule the broader stability objective of the FPC. It is a simple bit of wiring to make sure that we have joined-up Government and that all the branches of Government talk to one another.

Stewart Hosie: I support the amendment in principle, but surely it should have referred to a range of impacts, in the sense of a fan chart? It is not just macro-prudential tools, of course, but the impact of those with monetary policy, which may change —it may tighten or loosen—and fiscal policy, which may also have the impact of tightening or loosening monetary policy.

Christopher Leslie: I accept that. It gets to the nub of the issue. There is no single variable that has an impact like pulling a lever and an economic outcome comes along down the track. A number of factors combine to create an economic outcome. That is why people say it is sometimes more of an art than a science, but in so far as there is an ability to make projections or to measure, that assessment is needed. I hope it could be as sophisticated an assessment as the hon. Gentleman suggests.

Guy Opperman: I endorse the points made by the Chair of the Treasury Committee. Is it the accepted view on the shadow Front Bench that the promotion of competition is the key objective?

Christopher Leslie: We want to see more competition in the financial services sector. That is an important aspect of improving choice and reducing costs for consumers, but essentially the amendments that I have been discussing relate to prudential regulation. I do not think the competition argument necessarily supersedes that.
	I agree, and there is cross-party support for this, that we need to improve prudential regulation within our financial regulatory system. There is a degree of consensus in that area, which is why we did not vote against the Bill on Second Reading, for example. The question is
	how that pans out. The Chair of the Select Committee began his comments by saying that the Bill is defective in a number of regards and needs significant improvement. Amen to that. I agree. That is the problem and that is why I have so many concerns about aspects of the Bill, particularly in clause 5, in respect of the way the Government are choosing to divide up the regulators.
	I must move on. Another area about which I have concerns is the Government’s refusal to accept that the Bank of England should be under a duty to minimise the use of public funds—to minimise the recourse to taxpayers’ money—in order to support or rescue parts of the UK financial industry. If we were all to go back to our constituencies and explain what we were doing on Monday, we would say that we had been talking about the Financial Services Bill. Most of our constituents would say, “Good. Does that mean that the taxpayer is not going to be on the line to bail out all those banks again in the future?” and of course we would all want to say yes. That is the whole purpose of what we are supposed to be doing here.
	One of the most important things we need in the Bill is a provision to ensure that the system is designed such that any changes or rescue arrangements will not burden the taxpayer in the future. It is important to specify that the Bank of England should take responsibility for minimising that likelihood. It is a pretty straightforward amendment. These should not be partisan issues. That aim should be at the heart of the Bank’s financial stability objective. We know about the costs of bailing out the banks and how those have hit public finances.
	Having heard the Minister’s entreaties in Committee, the hon. Members for Wyre Forest (Mark Garnier) and for West Suffolk (Matthew Hancock) and others said that the our earlier amendment was deficient because it would have placed a duty on the Bank of England to minimise the use of public funds. I have thought about that carefully and come back with an amendment that simply requires the Bank to have regard to the need to minimise that. I hope that removes any worry about justiciability, which was one of the arguments upon which the Minister relied to rebut the suggestion in Committee. I do not think it is reasonable to say that it will blur or confuse the issue if we ask the Bank of England to keep in its mind’s eye the impact that any of its decisions will have on public funds. Ultimately, most of our constituents would expect us to legislate today to minimise the recourse to public funds. I hope the Minister will accept the amendment. If not, the other place will return to the issue.
	The hon. Member for Chichester pointed to amendment 53 in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) about parliamentary scrutiny. For this House, it is an incredibly important issue and I know that Members on the Government Benches feel strongly about it too. We are giving the Bank of England extensive new powers that will affect businesses, consumers and our constituents. We still do not know what these macro-prudential tools will be. We had a report from the Bank of England last December intimating that they may touch on certain aspects of loan-to-value ratios, although Paul Tucker, the deputy governor at the Bank of England, said the other day, “This looks like hot stuff. Maybe it’s too hot for us to handle at the Bank of England.” Maybe that is for the Treasury to decide. I think the
	Bank of England recognises that there is an accountability deficiency. That golden threat of accountability does not lead back to Parliament, as it should.

Mark Hoban: We have spent a lot of time discussing the issue. Does the hon. Gentleman not remember that the power to grant macro-prudential tools is subject to the affirmative procedure? There is a role for Parliament to play. My right hon. Friend the Chancellor said on Second Reading that he hoped that that debate would take place on the Floor of the House.

Christopher Leslie: That was a minor concession but, as we can see, we have possibly an hour and a half to debate a major macro-prudential tool—and only the Treasury’s order to enact the power in principle for the Bank, not the actual use of that power by the Bank. That would be delegated to the Bank.

Andrea Leadsom: Will the hon. Gentleman give way?

Christopher Leslie: I will give way to the hon. Lady as I know she has thought about the matter in great depth.
	It is important that we look at the work of the European Scrutiny Committee, for example. As hon. Members know, there is a steady stream of regulations coming from Brussels. Members of the Committee try their best to grapple with those, pick the most important ones and have a debate, albeit upstairs in Committee. When there are important issues, the measure is brought back to the Floor of the House for a vote. Ideally, I would like the Treasury Committee to deal in the same way with the sets of regulations that come on the conveyor belt from the Bank of England, but it has enough on its plate as it is. Perhaps we need a sub-committee of the Select Committee. Some sort of financial services scrutiny committee is required, with the time and space to go through the ramifications properly and thoroughly. Yes, then let the measure come back down under the affirmative procedure, but it is super-affirmative procedure that is necessary. That is essentially what we are doing.
	We cannot amend the Bill to affect the Standing Orders of the House. That must be decided as a separate arrangement. What I am doing in amendment 23 is suggesting that there should be a longer period of time to allow the House to conduct its own inquiries into these issues. Essentially, I have cut and pasted the procedure under the Public Bodies Act which was recently passed by the Government, whereby if they wanted to abolish any quangos, the relevant Select Committee should have time and space to conduct its inquiries. That is, I hope, an appropriate way of allowing space for better parliamentary scrutiny.
	I apologise to the hon. Lady; I know she wanted to come in.

Andrea Leadsom: I am grateful to the hon. Gentleman. He has probably given me the reassurance that I was seeking. It is not that we do not want the Bank of England to have those powers. In the past a lack of accountability and of central management has led to some of the problems that we saw during the financial crisis. It is not a question of focusing the authority and
	the powers within the Bank. It is a question of the accountability of the Bank in implementing those powers. Does he agree?

Christopher Leslie: Absolutely. That is right. We are not saying that these powers might not be necessary. However, let us say, for example, the Government and the Bank consider it necessary to lean against a consumer credit bubble. They want to change the minimum repayments that our constituents make on their credit cards from 2% a month to 5% or 10%. That will have a big effect on our constituents. Imagine us going back to those constituents when they complain to their Member of Parliament, as they undoubtedly would, and ask, “Whose decision was that?” We would say, “It was the Bank of England’s decision. We voted on this in theory a couple of years ago, but now the Bank has pulled the lever and pressed the button, and this has happened.” There would be great anger. The public would expect us, at the very least, to have had the opportunity to debate and discuss that in more thorough and substantive detail, albeit in a Committee. That is all we are suggesting in the amendment.

Stewart Hosie: The hon. Gentleman is absolutely right that there would be anger, but there would also be economic consequences. If one of the macro-prudential tools invoked was a change in sectoral capital ratios, which impacted to ration mortgages, and there was a 60-day consultation period, the impact in the market, either with deals being rushed through or deals being abandoned, might be as bad. Has he considered the downside of putting such information into the public domain for such a prolonged period?

Christopher Leslie: I did indeed consider the downside of having parliamentary scrutiny that might in some way impact adversely in an emergency scenario. We have not sought to amend the provision that would allow the Treasury to bring forward those orders in an emergency situation. It could do that. We could have retrospective scrutiny of that order once it had come into place. These are for ordinary, normal times scenarios. The amendment may be imperfect. I would have liked a proper way to deal with the issues, but there has been significant resistance along the way for such measures.

Andrew Tyrie: Does the Opposition spokesman agree that what we really need is a commitment in principle to a super-affirmative procedure in normal circumstances for the majority of these macro-pru tools?

Christopher Leslie: I totally agree with the hon. Gentleman. That is the very least that we should have. I simply counsel the House that many hon. Members are already under significant pressure because of the European rules and regulations that seem to come from an unaccountable place. It is not entirely unaccountable, but it can sometimes feel that way to our constituents. If we end up with a situation where we do not put in place at this stage the right parliamentary scrutiny arrangements, we are potentially opening up another front where a powerful institution, unelected and seemingly very distant from our constituents concerns, could have a major impact on their day to day lives, and we would be sitting
	here twiddling our thumbs unable to do anything about it, never mind even to debate it. We have had debates in the past on the retail distribution review and other examples where there has been massive frustration in the House about the lack of an accountability thread between parliamentarians and regulators. That would be magnified many times over if we did not put in place the right arrangements.

Mark Hoban: Does the hon. Gentleman believe that Parliament should override the detailed rules of regulators?

Christopher Leslie: In certain circumstances, Parliament should be sovereign. That is an important principle in our constitution. I do not think that regulators should be able to override Parliament, if that is the Minister’s suggestion. I am pretty sure it is not. Ultimately, in certain circumstances, Parliament should be able to make the final decision. That is an important cornerstone of our constitution.

Alun Cairns: It would helpful if the hon. Gentleman could outline some of the circumstances in which Parliament should overrule the regulators.

Christopher Leslie: It is entirely hypothetical. Of course we cannot do that at this stage, but there might be circumstances. I will remember the hon. Gentleman’s intervention for the many years that he will be in Parliament for when the time comes, if it comes, that he disagrees with a particular outcome of a regulation as it affects his constituents.
	Amendment 35 talks about the impact of many of the changes within the regulatory system on consumers, particularly those on lower incomes. We believe that the FCA should have enshrined in its objectives a commitment to consider how easily consumers are able to find products that are appropriate to their income, and more broadly, products that provide value for money. In difficult times as incomes are squeezed it is right that consumers feel that they have a regulator that is on their side. If we are creating a genuine consumer champion in the FCA, it is important that it has a set of objectives and values that reflect that, particularly for those on the lowest income. It is a similar argument to that made in the previous group of amendments in respect of the Money Advice Service. We have seen excessive overdraft charges, high interest rates, and charges for hidden services. Those require a genuine consumer champion and this amendment would help to create that.
	Amendment 36 would also shift the balance in favour of the consumer. It would introduce what is known as a fiduciary duty of care by authorised persons, by financial services providers, towards the consumers who are their clients. “Fiduciary” means holding in trust, holding in good faith, a concept that would help to rebuild confidence among the public in financial services. There is a serious lack of trust at present that is bad for consumers, providers and society at large. The Bill contains no explicit obligation on firms to avoid conflicts of interest, nor to profit at consumers’ expense without their knowledge and consent, nor to have undivided loyalties and duties of confidentiality to the customer. The pre-legislative scrutiny Committee commented on many of these aspects and recommended that some action be taken. Although the FSA has recently had its treating customers fairly
	initiative, we do not think that that is enough. We believe that a fiduciary duty of care is necessary, especially in the light of some of the major concerns of mis-selling scandals and the need to learn lessons from those.
	Amendments 33 and 34 relate to the costs and expense of establishing the FCA and PRA, splitting the FSA into those component parts. I apologise for rattling through these. We have to minimise unnecessary additional expenses incurred, because ultimately the consumers will pay. The FSA’s budget for 2013-14 has gone up by 15.6%. I accept that the new regulatory system will have some costs involved in that, but the majority of those costs are operational and not necessarily related to the principles of regulation involved. It was a bit of a joke to see in the White Paper the Government say that the running costs under the new arrangements should not be “materially different” in real terms and aggregate from the current FSA. That will not happen. We are talking about extremely significant extra costs.
	We suggest that the memorandum between these organisations should contain an estimate of the annual costs involved in administering the FCA and PRA, and compare those to the estimated costs of the administration of the FSA. That is a bit of a crude way of getting a cost comparator, but I would be interested in seeing it. Similarly, amendment 34 talks about minimising the
	“unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close co-ordination.”
	The PRA is moving to plush offices in Moorgate, leaving vacant space at Canary Wharf, a lease that expires way down the line in 2018. There is a sense in which there is a bit of empire building going on at the Bank of England, which will be responsible for the PRA. The Threadneedle street empire is growing strongly.

Sheila Gilmore: Will my hon. Friend also give some thought to those organisations that will be dual regulated and the additional costs that might be incurred?

Christopher Leslie: That is why it is important that at the very least they have information, and some level of accountability, about the likely costs of this tangle of regulatory structures for them. The Association of British Insurers has voiced its concerns about the costs of the new regulatory system and it is important that we at least know from the Minister exactly what those costs will be. He skirted around the issue in Committee. Even when I asked the cost of the new building for the PRA next to Threadneedle street he said that that might be commercial in confidence. If he can help us with that I will be grateful.
	The hon. Member for Chichester also spoke about publication of the minutes of the Bank of England’s court of directors. Amendment 27 seeks to introduce exactly the same for the FCA. If the FCA is to be a consumer champion, at the very least consumers should be able to see what is being discussed, who—potentially—is discussing it and, most importantly, what the nature is of the dialectic and discussions going on in its board. The Financial Secretary said in Committee that that will be a matter for the FCA, even though he could not really argue against the transparency principle, but he did promise that he would think about it. I saw a chink of light at the time and thought that publication of the
	FCA’s minutes was a simple concession that we might get in the Bill. I hope that he has had a chance to reflect on that.
	Amendment 39 relates to the relationship between the new regulators and the European supervisory arrangements. We might think that all these decisions on regulating credit, businesses and financial services are for us to take domestically in the UK, but I am afraid that 80% of the regulatory decisions are in fact taken in Brussels by the European Commission. Commissioner Barnier has his pipeline of proposals, which is very much the driving force behind the regulatory arrangements. Some of those are good changes, but nevertheless many people feel that the UK’s domestic regulators are there merely to transpose what is decided further up the chain, and that is of concern. Therefore, we want the regulators to be fit for purpose and able properly to influence and steer some of the policy decisions that are taken in Brussels.
	However, we have concerns that the way the regulators have been set up, moving between conduct and prudential regulation, sits ill at ease with the thematic way in which the pensions regulator, the banking regulator and the securities and markets regulator have been set up in Europe and that this mismatch could cause a significant hiatus in the way the UK exerts its influence. Therefore, amendment 39 simply asks that within a year of the Bill being enacted we have a review to test whether there is a need to improve the effectiveness of the way our regulators influence European regulators. It is a simple amendment.
	Finally, amendment 28 would leave out clause 5 altogether. It was with great regret that I decided that we needed to table the amendment, but the Bill is deficient in so many ways, as the hon. Member for Chichester suggested, that we felt we needed to address it. There is: the mismatch with the European regulators, which risks the further dilution of UK influence; the cost of having multiple regulators with insufficient effort to bear down on wasted duplication; the lack of a clear focus on tackling financial exclusion for those on the lowest incomes; poor scrutiny of the new rules that the regulators will generate; and insufficient transparency about the regulators and how they will reach decisions. It is for those reasons that we think that the Government have to go back to the drawing board and rethink, clarify and amend clause 5. The House of Commons should not have to approve such poorly drafted and inadequate arrangements for the FCA and the PRA. We hope that improvements can be made in the House of Lords.

David Mowat: Will the hon. Gentleman give way?

Christopher Leslie: I was just coming to my conclusion and am conscious that other Members wish to speak, so I will not give way. I simply urge the House to vote for the amendment in the hope that the House of Lords will improve clause 5.

David Ruffley: I rise to support new clause 1 briefly. I had the privilege of sitting on the Joint Committee on the draft Bill and of being a member of the Treasury Committee, which is chaired by my hon. Friend the Member for Chichester
	(Mr Tyrie)—colleagues have noted that he is not a Privy Counsellor, but as far as many of us are concerned he is right honourable in spirit.
	The main purport of new clause 1 is to establish a duty on the court of directors to conduct retrospective reviews of the Bank’s performance. The Governor of the Bank of England, in giving evidence to the Joint Committee and the Treasury Committee, has argued that it would be a bad idea to have a review into anything other than the processes by which certain policy decisions are reached. In other words, he does not want there to be a duty on the Bank to scrutinise retrospectively how good its decisions—meaning the decisions of the Financial Policy Committee or the Monetary Policy Committee—turned out to be. One of the reasons he gave was that there are lots of external commentators, such as outside economists in the City and the commentariat in the fourth estate, but it is fairly obvious that those entities are under no statutory duty to crawl through every decision of the FPC or the MPC and decide with hindsight whether they were good or bad.
	The second reason the Governor gave is that the Treasury Committee holds the Bank to account, a point alluded to by the hon. Member for Nottingham East (Chris Leslie). The Treasury Committee, packed with talent though it is on a yearly basis, still has a huge amount of work to do and, not for the want of trying, does not have the amount of technical expertise or the number of macro- and micro-economists needed to conduct work month after month, tracking back and looking at how good or bad the judgment calls of the FPC, as constituted by the Bill, and the extant MPC turned out to be. My word, don’t we need such backward-looking analysis? If it had been present in 2007 and 2008, we might have avoided the difficulties of which we are all too well aware.
	The Bill gives the Bank of England unprecedented powers. As a result of it, we will have a Governor of the Bank of England, whomever he or she is in the future, who will be chair of the Monetary Policy Committee, have a place on the court of directors of the Bank of England, chair the Financial Policy Committee and chair the Prudential Regulation Authority. With the creation of the FPC, alongside all the work that the Bank does on monetary policy, a lot of decisions are going to be made.
	Not since the creation of the Bank of England in the late 17th century has its senior management and Governor had so much power, and, from even a cursory glance, the Joint Committee’s evidence and the evidence taken by the Treasury Committee in recent months all leads to one thing: one cannot have enough scrutiny of this big beast that the Bank will become as a result of the Bill coming into force.
	The Treasury Committee argued forcefully for a severe new set of accountability and scrutiny powers. We advocated the creation of a new supervisory body inside the Bank of England in order to replace the court of directors, because the court, as everybody knows, is packed full of amateurs—well meaning amateurs, but people who simply are not, by any stretch of the imagination, able to hold the Bank of England’s senior executive members, who are on the MPC and will soon be on the FPC, to account.
	The court includes has-beens in the City, or “never-was’s”, and people with indifferent reputations in the trade union movement, in manufacturing and in all aspects of public policy. But the evidence shows that remarkably few of them have any expertise in central banking matters, in fiscal policy, in macro-prudential policy or in monetary policy. The court is desperately under-geared, and its intellectual horsepower is not what it should be.
	A supervisory body, with a majority of external members, overseeing the FPC’s and MPC’s judgments and undertaking retrospective reviews is the best-case scenario; it is what the Treasury Committee thought would be the best solution for scrutinising this very powerful—all-powerful, I might add—Bank.
	I understand why Ministers have concluded that they do not want to go into battle with the Governor and the senior executives about a supervisory body, because it is way too radical, but it is absolutely incumbent on this House to look at the purport of new clause 1 to see that it actually imposes more scrutiny than the Bill currently provides on the policy decisions of not just the MPC, but the FPC. Let us not forget that the MPC has recently acquired, or arrogated to itself, certain very significant discretionary powers over monetary policy—not in setting the bank rate, but in quantitative easing.
	How many debates have we had in this Chamber about QE and its merits or relative de-merits? The answer is relatively few. The Monetary Policy Committee is held to account only by the Treasury Committee. It is my suggestion that the Treasury Committee, marvellous and wonderful though it is—I am a member of it, so I would say that—will need the assistance of ex-post reviews to look retrospectively at the quality of the decisions that the Bank, with its new powers, makes. I therefore urge colleagues to support new clause 1.

George Mudie: I congratulate the Chairman of the Treasury Committee on new clause 1. I disagree with what was said about him becoming a right hon. Member. In my experience of this place, somebody as independent and straightforward has little chance of becoming right honourable.
	On a more serious note, I follow my colleague on the Treasury Committee, the hon. Member for Bury St Edmunds (Mr Ruffley), in saying that the Minister would be well advised to accept the amendment or to indicate that further thought will be given to it. I agree with my colleague that the amendment could and should have been much harder. The problem is with the behaviour of the court of the Bank of England. It is not that it has not been given power; it is that it has accepted the boundaries and the servile role imposed on it by the Governor and the executives of the Bank of England. As I have said in this Chamber and as has been said to the Treasury Committee in all but terms, the court is allowed to count the paperclips, but that is about it. Anything serious or to do with policy is nothing to do with it. If its members had any dignity or self-regard, they would not be part of it, because apart from receiving a nice little stipend for going, one wonders what on earth they do.
	The discussion in the Treasury Committee, and even in the Joint Committee on the draft Financial Services Bill, has been about bringing the corporate governance of the Bank of England into the 21st century with a proper board, and about stopping it being the fiefdom
	of one person. If I were the Minister, I would accept the new clause in spirit and say that I would speak quietly to people about it to strengthen the proposals and move on. He could well find himself having a much stronger position forced upon him, which would be good for the Bank of England in the long run.
	I congratulate my hon. Friend the Member for Nottingham East (Chris Leslie) on amendments 22 and 23. I will deal with them briefly because many Members want to speak. This is not a political point, but the response to those amendments from Government Members is interesting, because my hon. Friend has raised a matter that deserves discussion and thought. The powers being given to the Financial Policy Committee will affect people, industries and firms, and there must be accountability. The problem arises from the fact that there is no consensus on the definition of financial stability, but the House is setting up a Financial Policy Committee, the objective of which is financial stability. The Chancellor of the Exchequer raised the most pertinent point before the Joint Committee, which was that although we do not want it to, the FPC could define financial stability as the “stability of the graveyard” and reach it. My hon. Friend the Member for Nottingham East raised that point today.
	If the FPC had the responsibility for making the definition and wanted to do it without much fuss, it could set the required level of economic activity so that it neither pressed the ceiling nor went through the floor, but would that give us the growth and employment that the Government might want? Should not the FPC be asked to work towards the Government’s policy, whichever party is in government?
	Let me be mischievous for a moment. I know that after the Budget it is quite clear that the Government run the finances with not much view to growth. None of the measures in the Budget changed the growth forecast in any way whatever, and I think it will probably go down this week. However, the Government, the Treasury, the Bank of England and the FPC should operate against a remit, and if that remit cannot be defined, it will be hard for the Treasury Committee or anyone else to hold them to account.
	Amendment 22 is very modest. The hon. Member for Warrington South (David Mowat), who spent many hours on the Joint Committee with us, says that the Committee did not agree to its provision. I do not mean this to be controversial, but paragraph 44 of the Committee’s report states:
	“The Bill should be redrafted so that like the MPC, the FPC must have regard to the Government’s growth and other economic objectives subject to meeting its primary responsibility of attaining financial stability.”
	That wording may be less objectionable to him than that of amendment 22, but it states that the FPC should not be run in a vacuum. If the Government are seeking a given level of growth or employment, the FPC should not do things that cut across that. In fact, it should work its policies to ensure that it happens.

David Rutley: I know that the hon. Gentleman is very knowledgeable about these matters and was on the pre-legislative scrutiny Committee, but has he not seen that proposed new section 9C(4) in clause 3 contains
	some clear wording about what the FPC should do? It states that subsections (1) and (2) of that proposed section do not
	“authorise the Committee to exercise its functions in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy”.
	The matter is addressed, so what does he want in addition to that, and why does he feel the need for more?

George Mudie: I accept that point, which has been made clear all the way through, but that is negative language rather than positive. Instead of telling the FPC, “In carrying out your duties, you mustn’t adversely affect growth”, I would rather put it to work with the MPC on ensuring that we have a buoyant economy with steady, acceptable growth and employment levels. At the moment, apart from the negative words that the hon. Gentleman quotes, all we have is the requirement of financial stability.
	The hon. Gentleman was with a number of colleagues here on the Treasury Committee. We go through accountability with the MPC. It is bad enough trying to get the Governor of the Bank of England to be accountable even when he has a named target; what would he be like, or what would a future Governor be like, when he came before the Committee to which he was accountable and only had to defend his actions on the grounds of financial stability, which cannot be defined? It is a case of the emperor’s new clothes. There really should be a joint mandate, with a definition of financial stability and an acceptance of the Government’s picture of growth and employment.

Kelvin Hopkins: I agree with very much of what my hon. Friend says. When the Bank of England was given its independence—so-called—I thought that if it started to fly in the face of what was obviously sensible for the economy, a Government might choose to take that independence back to the Treasury and into the hands of the Chancellor. If the Bank is not sensible in respect of managing the economy as a whole, is it not possible that a Government might choose to take back that independence and operate policy from the Treasury?

George Mudie: One can see many scenarios. I have seen many political philanthropists since I have been a Member of Parliament. I worry because they come to the House as politicians, but seem not to want to do anything or take any responsibility. They have offloaded power to quangos and agencies, and gave independence to the Bank. The real question is why are the Chancellor and the Treasury sitting back and watching their ground—sensitive economic ground—being given away to a quango, an unelected bunch of people? Under the Bill, those people can take the remit and the guidance on it, which the Treasury sets, and say to the Treasury, “We don’t agree with you,” and that is that. That is the situation we are reaching on accountability and responsibility despite the worry about giving away powers.
	On amendment 23, some hon. Members were hard on my hon. Friend the Member for Nottingham East, although it is not as if he cannot defend himself. The Government’s original proposition, which was put out
	for consultation, included macro-prudential tools, which, as hon. Members have said, are highly sensitive and powerful. One aspect of the proposal they have given up because of its sensitivity—I am going by what has been in the papers in the past few days—is the ability to interfere in the mortgage market on loan-to-value and similar matters. What happens if the unelected Financial Policy Committee starts leaning against the wind in a way that affects large numbers of people, and there is no way of talking to it or affecting its position?
	The Government’s original proposal was that decisions on macro-prudential tools would go upstairs to the Committee Corridor as statutory instruments—secondary legislation—for a 90-minute debate on a measure that would not be amendable. All hon. Members know what happens upstairs. The Minister talks for an hour, the shadow Minister talks for 25 minutes and we all go home, with the measure voted through by the Government majority. That happens with Governments of all parties. The way secondary legislation is dealt with in Parliament is an absolute disgrace. We can excuse a lot of it, but matters as important as the ones we are discussing, it is scandalous.
	To be fair to the Chancellor, I raised the proposal with him when he first introduced it and asked him to look at it again because of its undemocratic nature. I am pleased that the line has softened, but there is more talking and work to be done. If hon. Members are asked to give away powers that affect our constituents so directly, it is important for us to be absolutely sure that we have had the opportunity to at least have our say in the strongest possible terms and ones that might allow the regulator to think about what has been said, although it is not for us to take its take its job.
	A Government Member attacked my hon. Friend the Member for Nottingham East and asked him whether he would interfere with a regulator. We had that situation when the Treasury Committee discussed the retail distribution review with the chief executive of the FSA. We said to him, “This Committee feels strongly about this matter. We’ve had a lot of press about it and a lot of pressure, and we’d like you to think again.” He replied, “No, we won’t think again, unless you give me evidence.” The Treasury Select Committee giving evidence to the chief executive of the FSA—what arrogance! My hon. Friend the Member for Nottingham East is doing the Government a favour. They might not agree with the detail of the amendment, but the spirit is that we give the House every opportunity to comment on, think about and be aware of the powers we give to individuals that might affect our constituents.

Mark Garnier: It is a great pleasure to follow the hon. Member for Leeds East (Mr Mudie), with whom I serve on the Treasury Committee. It is interesting that I am the fourth consecutive Committee member to speak.
	The House will not be surprised to hear that I rise to speak to new clause 1, tabled in the name of my hon. Friend the Committee Chairman, under whom it has been a great pleasure to serve. He is a very forensic Chairman of a Committee doing some extraordinarily good work at a time when it could not be more important—when we are facing some of the most fundamental problems in the economic world and when
	it is incredibly important that we do something significant about financial regulation. There is no doubt that something needs to be done. We have had a problem with a system of financial regulation that failed to address the problems with the banks, and the Bill travels a huge distance in trying to resolve those problems and come up with a robust new regulatory framework.
	Having been a compliance officer under not one but three regulatory regimes—the Securities and Futures Authority, the Financial Services Authority and the Securities and Investment Board—and, prior to that, a regulated dealer on the floor of the stock exchange under the old stock exchange rules, I have had a fair degree of practical experience of financial regulation. Furthermore, in the past 18 months or so, I have, with the rest of the Committee, spent a huge amount of time scrutinising and studying the draft recommendations for the Bill. I also spent some 50 hours, in the Bill Committee, with the hon. Member for Nottingham East (Chris Leslie), who waxed lyrical and at great length—and with great intelligence, I might add; and here we are on the Floor of the House talking about the matter yet again.
	A number of things in the Bill are not ideal, but the one surgical cut that would have the most effect would be new clause 1. The Bill contains perhaps the single most fundamental change that we will see in financial regulation—the creation of the Financial Policy Committee. We have heard a lot about the FPC. One of the criticisms is that it could make profound changes to our financial system in trying to deal with financial instabilities, with bubbles that seem to be growing and all the rest of it. We can speculate ad nauseam about the type of interventions that could be made, but the one that people talk about a great deal is where the FPC may, with one of its tools of direction or recommendation, direct banks to change the loan-to-value ratios on mortgages. That could have far-reaching effects for our constituents.

Mark Hoban: May I make it clear that the FPC has ruled out intervening on loan-to-value ratios? It is important that we do not let this hare continue to run much longer.

Mark Garnier: I am grateful to my hon. Friend for that clarification. Interestingly enough, though, it is perhaps one of the powers that the FPC should have kept. Although it could have profound effects for people moving and so on, it is incredibly important not to lose sight of what others issues the FPC is there to address. In the past, as bubbles have grown, Members have sometimes been reluctant to take away the punch bowl before the party is over. Sometimes, when we allow bubbles to get bigger than they should be, the result is a financial crisis of the kind that we have seen. There are many things, on an analysis of the financial crisis, that could have happened, but one of them was allowing a colossal asset bubble to grow against uncontrolled lending. If a Member of Parliament or the Chancellor of the Exchequer had turned around in 2007 and said, “We’re going to stop that,” there would have been an absolute outcry. However, if the FPC had done that, it would have been acting without the worry about what would happen at the next general election, and perhaps we would have avoided the problem. It is for that sort of intervention that the FPC is being created.

Bob Stewart: What happens when the FPC gets things wrong? How will it be held responsible for the decisions it makes?

Mark Garnier: I am grateful for my hon. Friend’s intervention, because that is exactly the point I am coming to. What is the accountability of the FPC? Ultimately, it has to come down, in some way, to the court of the Bank of England making an intervention to assess what is going on.
	As we have discussed, the FPC will have far-reaching powers to intervene, some of which we may never know about. Some might be restricted to a 30-year rule, so we might hear about them in the future, although an awful lot may well be published. However, it is incredibly important that we look at what the Bank of England does to supervise. Currently, the court of the Bank of England is responsible for administrative matters, as we have heard—it is responsible for pay and rations. What we on the Treasury Committee want is the Bank to have a proper board—probably with a new name that reflects its updated role, although I do not think that will happen. We recommended that it should have a majority of external members who must have the relevant skills and experience, and the Treasury Committee wants the court of the Bank to be able to conduct—this is an important point—retrospective internal reviews of policy decisions of the Bank. The Bank’s response envisages limiting that to commissioning external reviews or conducting internal reviews only of the decision-making process of the Bank.
	The creation of the FPC—on which my hon. Friend the Member for Beckenham (Bob Stewart) intervened on me—makes this governance issue incredibly important. As we have heard, the Monetary Policy Committee has just two tools: quantitative easing and interest rates, which it uses openly and publicly. We see detailed minutes of the meetings, followed up by evidence sessions by the Treasury Committee, which is also part of an incredibly important scrutiny process, which is fully transparent and very simple. However, as we have heard, the FPC has a large range of tools at its disposal, which means that it might not be able to give a full and open account to the Treasury Committee or publish entirely transparent minutes. Moreover, as I have said, it might be years before we know what intervention has been made. That is why we need an organisation that can intervene to look at what the FPC is doing and take on a strong governance responsibility.
	That is why the court of the Bank of England needs to be able to look at the merits of the FPC’s policies and not just the method. The Bank’s board must not be restricted to finding out whether the wrong decisions were made but in the right way. That is why I would be incredibly grateful if the Minister gave serious consideration to new clause 1.

John McDonnell: I am not part of the charmed circle of the Treasury Committee, but I wish to add my congratulations to the hon. Member for Chichester (Mr Tyrie) and the members of the Committee on the work they have undertaken in examining the Bill as it has gone through the House.
	I have tabled amendments 46, 47, 49 and 50, which seek to enhance the Treasury Committee’s role in the appointments of the Governor and deputy Governors
	of the Bank of England, and the chair and chief executive of the Financial Conduct Authority. I have done so because the background to this legislation is perhaps the most catastrophic failure of the Bank of England and the financial regulatory authorities that we have seen in 70 years. Their failure to predict or intervene effectively to ensure that the financial crisis was averted or dealt with adequately, speedily and effectively is there for all to behold. It has brought this country to its financial knees and into a recession that is turning into a depression, which is something we have not seen since the 1930s. The reasons for that have been evidenced today. New clause 1 would address part of the issue—namely, the lack of transparency of the old regime—but another element was the lack of accountability.
	This legislation will create, in the Governor of the Bank of England, one of the most important roles in the country. The Financial Times editorial of Thursday 19 April stated:
	“The central bank governor is not just some technocrat, but the most powerful unelected official in the country. His role has become more political since the crisis, not less, and will be even more sensitive when the BoE acquires new powers to avert financial crises. The next governor must win public acceptance and possess sharply honed political antennas. This might be harder for a foreigner.”
	That last comment refers to the speculation about some of the candidates that the Government are considering.
	In today’s Financial Times, the shadow Chancellor sets out his concerns about the range of powers and responsibilities that the new Governor will have, stating that only a superman or superwoman need apply, because the job will be so influential and will have such a wide range of roles and responsibilities. The Treasury Committee appreciated that fact very early on in the game, in its consideration of the new legislation. That is why, way back in November, it recommended that it should have a role in the appointment of this significant post. The Chancellor of the Exchequer argued against that proposition. I find it extraordinary that the Treasury Committee won the right to have a veto over the appointment of the chair of the Office for Budget Responsibility, yet failed to win a role in the appointment of the much more significant post of the Governor of the Bank of England. Indeed, it has no role in the appointment of the deputy governors, and no effective role in the appointment of the Financial Conduct Authority proposed in the Bill.
	I genuinely thought that the Government were about to shift their stance on this matter, because, back in November 2011, the Treasury Committee stated strongly that it was not persuaded by the Chancellor’s refusal to grant it a role in the appointment. It went on:
	“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR. We therefore recommend that, in order to safeguard his or her independence, the Treasury Committee is given a statutory power of veto over the appointment and dismissal of the Governor of the Bank of England.”
	I wholeheartedly supported that view. The Chancellor’s argument was that the Treasury Committee could not have such a role because the Governor was exercising an Executive function and should therefore be a Government appointee. That is an absolutely specious argument.
	The legislation to give independence to the Bank of England went through the House, although I never supported it. That means that the Governor has more than an Executive function. The Bank is not an Executive arm of the Government. The Chancellor of the Exchequer and the Government cannot have it both ways. If they support the independence of the Bank of England from the Government, they must establish some other form of accountability to Parliament. If they do not believe that it is independent, and that it is simply an Executive arm of the Government, the Governor will be appointed directly by the Chancellor of the Exchequer. Even if that is the Government’s argument, the Chancellor of the Exchequer is still accountable to the House, so there must be some role that the House can play in advising him on the appointment of this important post.
	My amendments would simply reassert the role of the Treasury Committee and thus Parliament itself in this vital range of decisions about appointments to key elements of the new structure proposed by the Government. Let me be frank. I agree with everything said about the role of the Treasury Committee Chairman and I agree that he needs to be called “right honourable” and the all the rest of it, but sometimes people are born great and sometimes people avoid greatness being thrust upon them. I do not know what negotiations went on, and it might well be that the negotiations were along the lines of, “We will not push for a veto on appointment as long as we can get some transparency and thus at least some element of accountability for that post to the Committee itself.” If that was the tenor of the negotiations with the Government—I happily allow the Treasury Committee Chairman to intervene to clarify it—I am afraid that the deal is not good enough.
	What needs to be said very clearly by this House is that these are such significant appointments—particularly the Governor of the Bank of England but also the head of the Financial Services Authority in view of its key role in seeking to avoid further crises and in regulating this country’s financial services—that this House must have at least some say over the calibre of these persons.

Andrew Tyrie: I can reassure the hon. Gentleman that the report does not reflect any back-room deals, but I would like to ask him a question. I am strongly sympathetic to the approach set out in his amendments. He needs to know that the Treasury Committee intends to hold pre-appointment hearings for these jobs in any case, including for the very senior jobs like that of the Governor, when he is identified. In the unlikely event that a nomination were challenged by the Committee, many would argue that the position of the person, even at nomination stage before he or she took up the appointment, would be untenable. In that case, does the hon. Gentleman not agree that the sensible thing for the Government to do is to engage with Parliament and with the Treasury Committee a little earlier in the appointments process?

John McDonnell: I wholeheartedly agree, but sometimes in relationships with the Government a line is drawn in the sand, which makes the right of veto sometimes crucial, particularly if there is a bloody-mindedness in the direction of policy making by the Chancellor when it comes to appointments to key posts. Although I take the gist of the hon. Gentleman’s argument and can see
	how the Treasury Committee could create a climate of opinion or produce a report that influences the appointment in a way that makes it impossible for a person to take it up because of the lack of credibility, I think there needs to be an even stronger role for the Treasury Committee and therefore Parliament in all these matters.
	This is a crucial opportunity missed in respect of the Treasury Committee’s ability to influence the Government; in respect of the Government’s ability to demonstrate to this House a greater openness when it comes to the transparency of the operation of the Bank of England and of the new regulatory authorities; and in respect of the Government themselves in how they make appointments to these crucial positions.

Diane Abbott: Does my hon. Friend agree that this is not just a matter of the relationship between the Government and this House, as it also relates to the relationship between the Government and the public? As we move into a period of austerity, if there is not sufficient accountability for the sorts of measures the Government view as necessary, it creates political instability. People do not see where the accountability lies for some of the austerity measures that are coming—not just in this country, but across Europe.

John McDonnell: That is exactly the point I am seeking to make. This post will have wide responsibilities and the decisions taken will have immense ramifications for the country as a whole and for all our constituents. Because of the unique role of the Governor of the Bank of England, the individual will be subject to public scrutiny in a way that a Bank of England Governor has never been under scrutiny before. I think he will become an individual in whom people must have confidence. I have to say that I have some anxieties about some of the names being bandied about at the moment, such as the appointment of a former member of Goldman Sachs, a company that does not have a particularly distinguished record in relation to the operation of economies throughout the world before and after the financial crisis.
	I appeal to the Government to think again about their refusal to allow Parliament to play a part in the final appointment of the Governor of the Bank of England in particular, but also in the appointments of deputy Governors. The Bill sets out the roles of the deputy Governors, and amendments which we will not debate tonight refer specifically to the possible appointment of a deputy Governor dealing with corporate ethical behaviour. The deputy Governors will perform the incredibly important task of restoring confidence to our financial system, and I believe that if Parliament does not have a say in their appointments, mistakes will be made. The same applies to the appointments of the chair and chief executive of the Financial Conduct Authority. People must have confidence in them as well, and I think that that will be possible only if their appointments are fully transparent and Parliament has a say in them.
	I urge the Government to think again. I fear that if they do not do so we shall have to revisit the issue shortly, because there will be no confidence in whatever appointments are made by the Government if they do not have the support of the House or that of the community in general.

Mark Field: It is a pleasure to be part and parcel of such an interesting debate. I especially commend the speech of my hon. Friend the Member for Chichester (Mr Tyrie). The hon. Member for Nottingham East (Chris Leslie) also made a thoughtful contribution, which covered a range of issues. As he said, it is regrettable that much of the real scrutiny of the Bill will be carried out in the other place, partly because of the guillotine but also because of the way in which votes on amendments are driven through here. I do not think that that reflects at all well on the House of Commons, which should be a place for genuine scrutiny rather than one that railroads Bills through their stages.
	I do not go quite as far as the hon. Member for Nottingham East does in amendment 28. I do not think that we should get rid of clause 5 altogether. However, there is little doubt that the regulatory changes proposed in the clause, and the creation of the new supervisory architecture, will do little to address some of the significant risks that currently exist in the market. I say that as someone who speaks to practitioners every day in my role as Member of Parliament for the City of London.
	A central issue is the ability of the FCA to carry out prudential regulation of firms that have sizeable assets and, often, complex structures. The recent failure of firms such as MF Global, Arch Cru and Keydata—all of which would have been prudentially regulated by the FCA—demonstrates the need for firms that have sizeable assets and are engaged in complex activities to be properly managed. One outcome of the failure of those firms has been that the liabilities of other UK businesses to the financial services compensation scheme are increasing in line with larger payouts to UK consumers. A wider effect has been that smaller and more innovative companies which, by their very nature, have less capital available to pay compensation on behalf of other firms face increased risk and rising costs. That will ultimately erode the attractiveness of London and, indeed, the UK as a venue for financial services businesses.
	The FCA will not be a specialist prudential regulator. The experts will be located in the Prudential Regulation Authority, and it will be important for the FCA to work closely with the PRA to ensure that complex firms within its scope receive an adequate quality of prudential regulation. It is therefore crucial for the Bill to contain adequate safeguards and assurances that robust information-sharing agreements will exist between the two regulators. That important detail is lacking in both the Bill and the draft memorandum of understanding.
	The Government should provide greater protections in clause 5, specifically in regard to the relationship between the FCA and the PRA. That would enable the two regulators to share information on systematically important companies to ensure that the PRA could make a judgment on whether they needed macro-prudential regulation. A key question is whether the FSA has learned from the problems of Lehman Brothers and the events of the past three and a half years or so. Despite the financial crisis, the FSA has failed to adjust the manner in which it supervises firms. The Turner review, published in 2009, provides a detailed analysis of the causes of the economic crisis and the areas of the financial and economic system in which the FSA and other, global regulators failed to identify growing problems.
	The review promised a new philosophy of regulation that it describes as “intensive supervision”. That amounts to a huge number of new initiatives and commitments:
	a significant increase in the resources to be devoted to the supervision of high-impact firms; an increase in the resources devoted to sectoral and firm comparator analysis; investments in specialist skills, with supervisory teams able to draw on enhanced central expert resources; a much more intensive analysis of information relating to key risks; and an investment in specialist prudential skills.
	Three years on from the publication of the Turner review, the FSA has increased the number of conduct interventions, a proportion of which have not involved consumer detriment—for example, in client asset and financial crime cases—but it has not been able to prevent the failure of a number of non-systemic companies.
	The most worrying feature of what is going on at present, with the collapse of MF Global, Arch Cru and Keydata, is that under the new regulatory system they will all be prudentially managed by the FCA. It is set to be a competent financial conduct regulator, but it is no secret that it is not an expert prudential regulator. The prudential experts will all be located in the PRA. That is fine when the firms that are prudentially regulated by the FCA are small and relatively straightforward with few systemic risks, but none of the three firms to which I have referred can be regarded as small or straightforward businesses.
	We are going to hear a lot more about MF Global in this House in months and years to come. It was involved in complex transactions as an intermediary on a range of financial products. The estimated gap owed by MF Global to futures customers is as large as $1.6 billion following bankruptcy. The total cost for MF Global UK has been estimated in the region of £600 million, and about $1 billion of client money remains locked in other financial institutions according to its administrators, KPMG. The total liability to consumers when Arch Cru collapsed was some £100 million, and a £54 million financial redress scheme was agreed between the FSA and the other professional organisations, Capita, HSBC and BNY Mellon.

David Mowat: I completely agree with my hon. Friend’s comments about MF Global and the fact that we did not learn quickly enough the lessons of that or of Lehman. Is there not one major aspect, however, that the Bill does not address particularly well, perhaps because it cannot: the fact that the regulation of such firms must mirror their organisational structure, which is international? Neither the FCA nor the PRA, nor any other regulatory body, can do that without much more effort being made.

Mark Field: I do not disagree with what my hon. Friend says. However, the special administration in respect of MF Global—which, as I have said, will be high profile in years to come—seems to be considerably better organised in every other jurisdiction than it is in the UK. That is doing great damage to the reputation of the UK as a destination for financial services.
	Following the failure of the firms to which I have referred, the Financial Services Compensation Scheme has announced it will need to raise an additional £60 million in the investment intermediation sub-class, resulting in rising costs for firms in that category, and in the coming year both MF Global and Arch Cru will, I fear, generate further liabilities of some £600 million or more.

Alun Cairns: My hon. Friend is making very forceful points, especially on the FSCS. As that is currently funded by the industry itself, and given that the FCA cannot have detailed knowledge of the workings of every product, does my hon. Friend agree that in order to ensure that there is adequate protection, the FCA must work with the industry and accept the intelligence that comes from it?

Mark Field: My hon. Friend is absolutely right about that.
	I want to touch on the impacts, however. Smaller firms dominate the advisory and investment sector, and they clearly do not have the capital available to make the sizeable pay-outs that are an integral part of the scheme on behalf of other companies. The larger banks are present in most major financial centres, but it is the success of innovative smaller companies that marks out Britain’s financial services industry, or at least has done hitherto.
	I am aware, as I have spoken to this company in recent days, of a FTSE 250 firm whose costs have risen by 270% under the compensation scheme, year on year, from 2009 to 2010. That includes some £4.7 million of interim levy costs for Keydata, a current cost of £470,000 for MF Global—again, I fear that that is an interim cost—and some £700,000 for Arch Cru. The company had predicted that its total cost for MF Global could end up being as high as £9.5 million.
	This situation is an enormous concern. Firms are facing increased liabilities through the compensation scheme and the future structure of the supervisory regime does not suggest that prudential regulation of these firms is likely to be improved. This matter should be addressed in this Bill, as the FCA will not be a specialist prudential regulator. As I say, the experts are located elsewhere, so it is crucial that the Bill contains adequate safeguards and assurances that robust information-sharing schemes are to be put in place between the two regulators.
	I briefly wish to discuss my new clauses 2 and 3, which seek to amend section 166 of the Financial Services and Markets Act 2000. Section 166 sets out arrangements for a report by a skilled person, and the whole section urgently requires changing. The FSA has the power to insist on an investigation without determining who does it and without paying for it. The result has been that too many recent section 166 reports have cost the players in the financial services market huge sums, without producing anything of great value. Under the current regime, firms are guilty until proven innocent, and they have to pay for their own prosecution, regardless of whether guilt is proved or not.
	The number of section 166 reports has, perhaps understandably, risen dramatically since the 2008 financial crisis. Nevertheless, such reports are increasingly used as a standard regulatory method, rather than being reserved, as they should be, for the most serious cases. They are becoming a phenomenally big burden on hard-pressed small firms. The costs can run into hundreds of thousands of pounds in each and every case, and companies often cannot recoup the costs, even if there is no evidence of wrongdoing.
	I know that others wish to speak, but I just wish to put on the record the breakdown of the cost of section 166 reports. As I say, this is now an issue of major concern.
	In 2006-07, there were just 18 such cases, at a cost of £3.8 million. That number increased to 29, 56, 88 and 95 cases respectively for each of the four succeeding years, with the costs increasing from £3.8 million to £32.2 million for the year 2010-11. It is essential now that the FSA, which has not previously selected skilled persons to have a direct line of accountability, changes its whole approach on this matter. There is much more that I would like to say and I am sorry that time is so limited this evening. I hope that this matter will come back for further scrutiny, although I am afraid that that will be in another place.

Several hon. Members: rose —

Lindsay Hoyle: Quite a few more hon. Members wish to speak and the Minister wants to come in at 9.40 pm, so if we could help each other, I would be grateful.

Mark Durkan: I wish to join others in acknowledging the strong case that members of the Treasury Committee have made on the issues addressed in new clause 1. Like others, I do not think that new clause 1, in itself, goes far enough in resolving some of the Bill’s deficiencies, but it is a commendable effort.
	As we are dealing with a number of proposals that appear on the amendment paper under the heading “Governance of the Bank of England and the new regulatory structure”, there is a danger that we might make the mistake of thinking that all the provisions are about issues inside the beltway; we may think that they are all about parliamentary influence, scrutiny and the relationships between the Financial Policy Committee, the Bank of England and the Treasury and so on. Of course, as we heard in the remarks made by the hon. Member for Nottingham East (Chris Leslie), many of these provisions touch directly on issues that we thought we were discussing in the previous grouping in relation to consumer protection and the consumer interest.
	I wish to discuss a number of the amendments in this group that I have tabled, particularly new clause 13. It is aimed at dealing with what seems to be a fairly gaping loophole in the Bill and relates to provisions in clause 25, on page 108, and the regime for consolidated supervision of the parent undertakings of financial institutions. The provisions in the Bill as they stand would mean that the only parent undertakings that will be regulated under consolidated supervision are those that were deemed to be financial institutions, whereas those that were not deemed to be financial institutions would be immune.
	Given the changes we are seeing in the financial services market—including the activities of groups such as Tesco and the arrival of Virgin—we must ask whether there is a danger of an unlevel playing field for other providers in which some are subjected to consolidated supervision whereas others are not. More importantly, it gives rise to questions for consumers. Are they duly protected? Are those bodies that are not subject to consolidated supervision able to use their market intelligence in particular ways? Can they use their business, market and customer relationship with many people to the disadvantage of either consumers or other players?
	New clause 13 makes provision for what would happen so long as the Government wanted to go along the lines outlined in clause 25, which would allow the Treasury to amend the legislation by order in future and therefore change the qualification for financial institutions. If the Treasury were to say that that was to be the future proofing against other market changes, I would want it to be subject to regular review and assessment that would be brought before this House. The new clause therefore provides that the powers given to the Treasury to amend the legislation would be the subject of a review within the first year after the Bill received Royal Assent and of annual assessments after that. The power in the Bill to reconsider these matters rests entirely with the Treasury and not the regulators, whom we would assume would hear from other practitioners and from the consumers. The new clause creates a proper scenario of assessment by the regulators and the Treasury.
	I have put my name to other amendments in this group which also address consumer interest. They concern some of the language that would be used and expected as regards consumers as well as the status of the consumer panel. We are told that there will be a consumer panel for the FCA, but it is given no remit as regards the PRA, even though on some measures the FCA will have a duty to co-ordinate with the PRA. Some of those issues will, clearly, be about consumer interest. There is not the same scrutiny, comeback or advocacy for consumers built into the provisions for the PRA as there is for the FCA, and so a number of the other amendments would address that, not least amendments 69 and 70.
	Amendment 71 provides for improvements in the duty to co-ordinate between the FCA and the PRA. As I read the Bill, the duties on them to co-ordinate relate to their own interests and considerations. They are meant to consider what matters to them and to each other. I do not think enough is built in about the regard they are meant to have for the impact of their collective or separate efforts on firms that are subject to dual regulation. Nor is there sufficient emphasis on their having proper regard to consumer interest.
	This group of amendments is not just about governance and the relationship between the democratic process and regulation. It also goes to the heart of what regulation should be about, which is protecting the consumer interest and ensuring fair play in the marketplace.

Guy Opperman: It is a pleasure to speak in this debate, albeit briefly. Like Mark Antony in “Julius Caesar”, I come to praise the Bill, not to criticise it. I accept that the Government are all honourable men and women, but so, it might be reasoned, are the members of the Treasury Committee, who are also honourable men and women, advancing a slightly contrary view.
	I support the fundamental ethos of clause 1 and welcome the review of the performance of the Bank of England. I certainly do not support Opposition amendment 28, which would remove clause 5; that would be entirely wrong in the present circumstances. I speak as a critical friend of the present system and as the secretary of the all-party group on the Arch Cru Investment Scheme, which is seeking to recover compensation for the thousands of men and women in this country who have lost their lifetime savings. What happened to them is manifestly wrong, and anything that this House can do to strengthen the regulatory system to prevent such disasters, I welcome wholeheartedly.
	I speak also as an MP who, almost every week, has a constituent come to me saying that they are unable to obtain bank lending and finance. That is because of the lack of competition in the present banking structure—an issue that is raised regularly. I urge the House to embrace greater competition and to open up the market to competitors to the existing large banks, which will be in a position to provide the bank finance sought by businesses up and down the country.
	The other end of the telescope must also be addressed. At present, we have the large banks, but there are no small banks. Germany and America have local banking structures that work tremendously positively: individuals can set up local banks, which provide for a community purpose above all else, which is manifestly a good thing. That is why I support wholeheartedly the competition objectives set out in new section 1E of the Financial Services and Markets Act 2000, inserted by clause 5, which states that there should be an emphasis on
	“the ease with which new entrants can enter the market, and…how far competition is encouraging innovation.”
	I have met the chairman of Metro bank, which is that remarkable thing: a bank set up to exist at the weekend. It opens on weekends and at 8 o’clock in the morning. Imagine what could be done if we had that at the local level.
	I am grateful for what Hector Sants, the present chief executive of the FSA, told me in a letter dated 12 March:
	“We are conscious of the balance to be struck between ensuring high standards at the gateway, and the importance of allowing innovation and appropriate levels of access for new firms.”
	The letter continues:
	“there has been public debate about the potential advantages of new entrants in the area of small, regional banks focused on servicing the SME sector. In such cases we will be proportionate in our approach and would invite all firms with a viable business model and appropriate levels of resources to a pre-application meeting to help guide them through the application process”.
	The Bill will, I suggest and sincerely hope, make it easer to establish local banks, which can only be a good thing.

Kelvin Hopkins: I rise to express my strong support for the amendments in the name of my hon. Friend the Member for Hayes and Harlington (John McDonnell).
	There are two components of the argument: the first is the relationship between the Governor of the Bank of England and the Government, but the second is the relationship between this House of Parliament and the Government. On both, I strongly believe my hon. Friend has a point. Like him, I was unhappy about the decision to hand power over monetary policy to the Bank of England and give it independence. All aspects of macro-economic management ought to be matters for Ministers accountable to Parliament. I maintain that view and, in a sense, recent events have proved that my hon. Friend and I were right. I thought at the time that if the Governor of the Bank of England or the Monetary Policy Committee chose to be hawkish on interest rates when we had a recession on our hands, there could be a serious conflict between the Bank and Government. Fortunately, the Bank has been sensible in managing monetary policy and that clash did not occur, but it could have happened in 2008. Had the Bank been governed by a hawkish Governor, we could have seen a serious clash and those powers no doubt taken away. I was comforted by the thought that if the Bank of
	England got out of control, we could easily take back powers. It is not the same with the European Central Bank, where powers have been given away and cannot be taken back.
	In relations between Parliament and Government, pre-appointment hearings have been shown to be a success. I have been involved in not just the two most recent pre-appointment hearings, but in developing the arguments in favour of pre-appointment hearings as a member of the Public Administration Committee for the past 10 years. Brilliant work was done by Tony Wright, who made a real impact on our constitution. Pre-appointment hearings are first class. They are not just an experiment; they are here to stay. I would like the Governor of the Bank of England to be subject to a rigorous pre-appointment hearing so that we know that they will serve the economy and relate to the House, and not just be a law unto themselves. I have probably run out of time. I know the Minister needs to speak, but I have made my point.

Mark Hoban: This has been a thoughtful and constructive debate covering the wide range of issues in this group of amendments. I shall organise my remarks in two parts. I shall deal first with issues relating to the Bank of England and the Financial Policy Committee, and secondly with the Prudential Regulation Authority and the Financial Conduct Authority.
	I begin by speaking to Government amendment 12. This change was prompted by an amendment proposed in Committee by the hon. Member for Nottingham East (Chris Leslie), on the wording used to ensure that the view of the Treasury member of the FPC cannot be taken into account in determining whether the FPC has reached a decision by consensus. Although the substance of the provision, which is consistent with the general principle that the Treasury member of the FPC should not have a vote, was endorsed by the Committee, some members of the Committee thought that the wording was ambiguous. Some, including the hon. Member for Foyle (Mark Durkan), felt that the current wording could imply that the Treasury is not even allowed to exercise influence through debate or discussion.
	I therefore committed to look again at the wording to see whether it could be made clearer. Amendment 12 amends the provision to make it clear that in determining whether the FPC has reached consensus, the chair should disregard “any view expressed” by the Treasury member. This does not mean that the Treasury member cannot influence the discussion and debate, but in determining consensus, that voice should not be taken into account.
	The main focus of the debate has been accountability and transparency. That is absolutely right. Hon. Members are right to highlight the fact that as a consequence of the Bill, the Bank of England takes on more power and responsibility, partly because the PRA becomes part of the Bank family, and through the creation of the FPC. It is right that we strengthen the transparency and accountability of the Bank as a consequence of the reforms before us. The debate about macro-prudential tools was a helpful way of characterising that debate and talking about some of the proposals that we have made. We are committed to ensuring the ex ante approval
	of those macro-prudential tools by this place and the other place. Hon. Members are right to call for a review of the use of those tools and a retrospective review of the Bank’s performance. That is important too.
	Let me deal first with the ex ante side of the equation. Amendment 22 talks about economic growth being part of the FPC’s objective. The Government are clear that the FPC’s principal aim should be to make the financial system safer and more stable. We do not seek the stability of the graveyard. The FPC should not be able to pursue stability to the point where the financial sector can no longer support the real economy. This means that the FPC should not be able to take action that would seriously damage the ability of the financial sector to contribute to growth in the medium to long term and the FPC should consider whether the costs of the action that it proposes would be disproportionate to its benefits. The Bill as drafted already ensures this.
	The economic growth element in the FPC’s objective is stronger and more restrictive than the growth element in the MPC’s objective. The MPC’s secondary objective
	“to support the economic policy of Her Majesty’s Government”
	is subordinate to the primary objective to maintain price stability. This means that the MPC need only pursue its secondary objective if it has no impact on price stability. In contrast, the economic growth “brake” imposed on the FPC by new section 9C(4) is an absolute prohibition. The FPC cannot in any circumstances take action that would have a significant adverse effect on the ability of the financial sector to contribute to the sustainable long-term economic growth of the economy, regardless of the impact on stability. There is a strong element in the FPC’s objectives to get right the balance between stability and growth.
	Amendment 23 relates to the super-affirmative procedure for statutory instruments on macro-prudential tools. The Government agree that public and parliamentary scrutiny of macro-prudential tools is important. The Bank has already consulted on tools and made public recommendations to the Treasury. The interim FPC has recommended to the Treasury that the statutory FPC be given the following three tools: the counter-cyclical capital buffer, sectoral capital requirements and a leverage ratio. That was in a document that it published in March. The Government are considering those recommendations and will consult publicly on their proposals for the FPC’s initial toolkit during the passage of the Financial Services Bill. The Government will aim to maximise the amount of scrutiny available to Parliament. The secondary legislation itself will, as recommended by the Treasury Committee, be subject to approval by both Houses of Parliament, as will any changes to it to reflect changes to the FPC’s toolkit. Therefore, strong arrangements are in place to ensure that there is public and parliamentary engagement in determining the macro-prudential tools that should be available to the FPC.

Andrew Tyrie: I realise that the Minister will not want to commit himself to change anything now, but would he be prepared to say now that he would consider looking at the possibility of going a little step further than the affirmative procedure in some measure towards something that we would recognise as a super-affirmative procedure for these measures?

Mark Hoban: My hon. Friend makes an important point. We need to ensure that the right scrutiny arrangements are in place, but we also need to recognise that the super-affirmative procedure can create delays, because there are times when if the House is in recess the clock stops, so there is a challenge there. In addition, a blanket adoption of a super-affirmative procedure may mean that even minor technical changes are subject to quite a lengthy process. The point that I would take from this debate is that we need to ensure that proper parliamentary scrutiny of these measures is in place, and that there is proper consultation with the public and a proper assessment of the economic impact of these macro-prudential tools on the wider economy. I hope that the Government’s position is clear. I am not ruling out the proposal. There are some issues with it, but we are committed to ensuring that the right procedures are in place to ensure proper parliamentary scrutiny.
	I come now to the matters at the heart of new clause 1 tabled by my hon. Friend the Member for Chichester (Mr Tyrie) and his colleagues from the Treasury Committee. I agree entirely that the robustness of the Bank of England’s governance arrangements is vital. Hon. Members on both sides of the House have been absolutely right to point out that it is even more important given the expanded responsibilities provided to the Bank of England under the legislation. There is a consensus that the governance of the Bank needs to be strengthened in order better to equip it for these new roles. The court will need to adapt and evolve in order to operate as an effective governing body, able to oversee the Bank in transition and in steady state, ensuring that the Bank is adequately resourced to meet its new responsibilities, offering challenge to the Bank’s executive and supporting accountability to Parliament. With that in mind, a set of proposals has already been put forward by the Bank of England to help address these concerns.
	Last year the Treasury Committee published an in-depth and thoughtful report into the accountability of the Bank. In response to that, the court of the Bank of England set out some positive and constructive proposals to strengthen its oversight of the Bank’s financial stability activities and to enhance accountability. Central to the court’s proposals is the creation of a new oversight committee for financial stability, a sub-committee of the court that will be responsible for overseeing the entirety of the Bank’s financial stability activities. This wholly non-executive committee will have access to the meetings and papers of the Bank’s policy-making committees, including the FPC, and will be able both to review the internal decision-making processes leading to policy outcomes and to commission periodic reviews of policy-making performance from expert external authorities. These reports will be published, unless publication would be contrary to the public interest. We welcome the court’s proposals.
	My hon. Friend the Member for Chichester, in his remarks welcoming the court’s response to the Treasury Committee’s recommendations, recognised that there has been change, but he also outlined a number of areas in a report published on 23 January and argued that the court’s proposals did not go far enough, particularly with regard to the policy reviews. Recognising this, the Chancellor agreed with the Governor and the chair of the court that the new oversight body will be expected to commission retrospective internal reviews from the
	Bank’s policy makers of their own policy making and implementation performance. I think that the Bank has made some progress, but my hon. Friend raised the important question of whether the oversight arrangements should be set out in primary legislation in the Bill.
	My hon. Friend the Member for Chichester also mentioned publication of the court’s minutes. The Bank has committed to publishing what it terms a record of future court meetings. It is worth pointing out that the FPC also produces what it calls a record of its meetings, which is a very full account of the debates that go on in the FPC, and we will expect a similar process to be undertaken for the court’s meetings. Let me be clear: I believe that there is a clear need for the Bank’s accountability arrangements to be strengthened through the publication of the court’s minutes and the enhanced scrutiny of the court’s work, although I believe that the changes announced by the Bank help address the concerns raised by my hon. Friend and the Treasury Committee. He made some powerful arguments that have been echoed by other members of the Committee, and we will consider further whether these arrangements should be put in the Bill. We will reflect on these matters and reconsider them when the Bill goes to the other place. I hope that that helps to reassure the House on how seriously we take these matters and our willingness to listen and respond to the concerns raised by Members during the debate, particularly the contributions made by my hon. Friend and others.

Christopher Leslie: I just want to be clear about what the Minister is saying. Is he saying that when the Bill comes before the other place for consideration he will accept retrospective reviews and publication of minutes or that he will simply consider it?

Mark Hoban: We are clear that we want to see the court’s minutes published, which I think is absolutely vital, and that we want to see those retrospective reviews in place. The questions my hon. Friend the Member for Chichester has asked are whether we have gone far enough, whether the proposals should be in the Bill or whether we should just accept the proposal put forward by the court. Tonight I have committed to listening to those arguments—he made a powerful speech—and returning to the issue when the Bill goes to the other place.

Andrew Tyrie: Will the Minister clarify a couple more points? First, when he says that he is committed to the publication of the court’s minutes, does he mean the publication of the full minutes or only a summary record of them, which it appears is what was proposed before. Secondly, he thoughtfully suggested that the non-executives of the Bank should commission internal reviews. Will they also be permitted to look at, assess and comment on the merits of the material they receive?

Mark Hoban: I think that it is important that the court’s non-executives perform a full role in scrutinising the Bank’s activities. They need to be able to look at the output of those reviews, consider them and express their views on them. On the issue of minutes, I will not say that we are getting into a semantic debate, because that would be unfair. What we want to do is ensure that a proper record of the court’s meetings is published.
	I am not sure that the minutes should necessarily be verbatim, reporting every word that everyone has said, but they should certainly be a very good summary, catching the thought processes that took place in the court and the issues that were debated and discussed, so that Parliament and stakeholders can hold the Bank to account for the way in which it has used its powers not just when it comes to the Financial Policy Committee, but in other areas. I hope that that gives my hon. Friend the reassurance he looks for on our commitment to transparency and on ensuring that we do all we can to strengthen the transparency arrangements of the Bank of England.
	I am very conscious that a number of other points were made, and I want to discuss them. The hon. Member for Hayes and Harlington (John McDonnell) tabled two amendments on the appointment of the Governor of the Bank of England and Parliament’s role in it. We do not have time tonight to go into the detail of that procedure, but the Chancellor has said that there will be an open process, and having heard the debate in the House he will reflect on it when thinking about how the process should develop.
	I turn to Government amendment 1. In Committee, the hon. Member for Nottingham East argued for a check on the PRA’s ability to decide not to disclose the use of its veto over the FCA. The Government accept that the PRA will always be the best placed organisation to determine whether or when to disclose the use of its veto, but there is room for an element of independent consideration when it decides against such disclosure. The Government have therefore decided to place a duty on the PRA, through amendment 1, to consult the Treasury on a decision not to disclose, and this will ensure that proper disclosures do take place.
	I will respond in writing to the remarks that my hon. Friend the Member for Cities of London and Westminster (Mark Field) made on the use of skilled persons. He raised some important issues.

Alun Cairns: Does my hon. Friend recognise the strength of a practitioners panel in relation to the PRA, given that he has already accepted the merits of a practitioner panel in relation to the FCA?

Mark Hoban: What is important is that the PRA establishes its process for consultation with regulated firms. It is required to set out in its annual report its process of consultation.
	In conclusion, this is an important part of the legislation, and I am very disappointed that the hon. Member for Nottingham East has tabled a wrecking amendment that would take the guts out of the Bill. I thought that the Opposition supported the reform of financial regulation, but they clearly do not, so I hope that if the hon. Gentleman puts his wrecking amendment to the vote the House will oppose it.

Andrew Tyrie: I am grateful to the Minister for what I have heard this evening. He has shown enough flexibility for me to feel able to withdraw new clause 1, but before I do so it is just worth my spelling out what I think I have heard.
	I think I have heard that we are going to have the publication of the full minutes of the court of directors, and that we are going to permit and, indeed, encourage the court—the non-executives of the Bank of England—to commission internal reviews, to assess them and to give us their assessments, made available to Parliament.
	I heard also about some flexibility on whether we will go beyond the affirmative procedure when looking at macro-prudential tools. Their proper scrutiny is extremely important for millions of people in this country. Whether we will go as far as a super-affirmative procedure I do not know, but an element of flexibility has also been provided for there.
	With that in mind, my intention is not to push new clause 1 to a vote. I beg to ask leave to withdraw the motion.
	Clause, by leave, withdrawn.

New Clause 10
	 — 
	Mortgage rate forewarning

‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.—(Chris Leslie.)
	Brought up, and read the First time.
	Question put, That the clause be read a Second time.
	The House divided:
	Ayes 215, Noes 290.

Question accordingly negatived.
	Proceedings interrupted (Programme Order, this day).
	Mr Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

Clause 3
	 — 
	Financial stability strategy and Financial Policy Committee

Amendment proposed: 22,page3,line37, after ‘functions’, insert—
	‘having regard to the economic policy of Her Majesty’s Government, including its objectives for growth and employment’.—(Chris Leslie.)
	The House divided:
	Ayes 216, Noes 290.

Question accordingly negatived.

Schedule 1
	 — 
	Bank of England Financial Policy Committee

Amendment made: 12,page169,line35, leave out ‘anything done’ and insert ‘any view expressed’.— (Mr  Hoban .)

Clause 5
	 — 
	The new Regulators

Amendment proposed: 28,page15,line4, leave out clause 5.—(Chris  Leslie .)
	Question put, That the amendment be made.
	The House divided:
	Ayes 205, Noes 301.

Question accordingly negatived.
	Amendments made: 1,page34,line21, leave out ‘considers’ and insert
	‘after consulting the Treasury, decides’.
	Amendment 2,page37,line15, at end insert—
	‘(4A) The FCA may enter into arrangements with a local weights and measures authority in England, Wales or Scotland for the provision by the authority to the FCA of services which relate to activities that are regulated activities by virtue of—
	(a) an order made under section 22(1) in relation to an investment of a kind falling within paragraph 23 or 23B of Schedule 2, or
	(b) an order made under section 22(1A).’.
	Amendment 3,page37,line34, leave out ‘the supply of particular’ and insert
	‘particular decisions relating to different’.—[Mr Hoban.]
	Bill to be further considered tomorrow.

John McDonnell: On a point of order, Mr Speaker. The main purpose of the Financial Services Bill—

Mr Speaker: Order. May I appeal to Members who are planning to leave the Chamber to do so quickly and quietly, so that the House can do the hon. Member for Hayes and Harlington (John McDonnell) the courtesy of listening to his point of order?

John McDonnell: Thank you, Mr Speaker.
	The main purpose of the Financial Services Bill was to secure corporate responsibility in the financial sector, and the batch of amendments that were not reached dealt specifically with corporate responsibility. May I, through you, Mr Speaker, convey a message to the Leader of the House, who is present? There will be a second day of debate on the Bill, and he may well wish to look at the programme motion again to establish whether we can debate the important elements of those amendments on that second day.

Mr Speaker: I am grateful to the hon. Gentleman for his point of order. Let me say two things to him in response to it. First, as he can see with his own eyes, the Leader of the House is present, and will have heard what he has said. Secondly, business questions on Thursday will provide a good opportunity for him to pursue the matter further—and, knowing his indefatigability, I expect to see him in his place on that occasion.

Business Without Debate

DELEGATED LEGISLATION

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Children and Young Persons

That the draft Children Act 2004 Information Database (England) (Revocation) Regulations 2012, which were laid before this House on 1 February, be approved.—(Mr Vara.)
	Question agreed to.
	Motion made, and Question put forthwith (Standing Order No. 118(6)),

Prevention and Suppression of Terrorism

That the draft Schedule 5 to the Anti-terrorism, Crime and Security Act 2001 (Modification) Order 2012, which was laid before this House on 1 March, be approved.—(Mr Vara.)
	Question agreed to.

PETITION
	 — 
	Darlaston Road Crossing (Walsall South)

Valerie Vaz: I rise to present a petition from the residents of Walsall South.
	The petition states:
	The Petition of users of Darlaston Road zebra crossing, near Hough Road in Pleck, Walsall,
	Declares that the Petitioners are concerned that there have been a number of accidents and near misses on the Darlaston Road zebra crossing near Hough Road in Pleck, Walsall.
	The Petitioners therefore request that the House of Commons urges the Government to call on Walsall Borough Council to immediately install a signal-controlled crossing in place of the existing zebra crossing on Darlaston Road, near Hough Road in Pleck, Walsall, before any further serious incidents occur.
	And the Petitioners remain, etc.
	[P001020]

SMART METERS

Motion made, and Question proposed, That this House do now adjourn.—(Mr Vara.)

John Healey: I am grateful to have secured this Adjournment debate. I am both a supporter and a sceptic of smart meters. I strongly back the benefits that could come from universal smart meters with the right specifications for all consumers, but I am concerned that the Government need to get a grip on some of the essential elements of the national programme. I am also concerned that consumers will end up footing the big national bill without knowing it. There are, too, already consumer complaints over early installation of smart meters, which could irrevocably damage confidence and the reputation of the programme if they are allowed to escalate.
	This is a hugely ambitious prospectus for us all. It was kicked off by Labour when in government, and is now being continued by the coalition. The aim is to install 55 million high-tech gas and electricity meters in all UK households and businesses by 2020. I am told that those involved in the project have as their mantra, “Starting well and finishing early.” If the Government get this wrong, it could end up starting badly, failing to finish and costing the consumer dearly.
	Let me start by being upbeat. Our UK smart metering plan has a number of world-first features. It involves both gas and electricity meters; it builds in a requirement for an in-home display for all consumers; it sees installation as being led by energy suppliers rather than the energy distribution and network firms; it has functionality for the consumer, the energy supply companies and the network operators that is far ahead of smart meters in other countries; and it places a single central data communications provider at the nerve centre of the system.
	That is why consumer groups, including Which?, as well as energy companies and industry experts, all accept the potential benefits. Those benefits include: an end to estimated energy bills; detailed real-time information on energy use, with options to reduce consumption and bills; new tariffs based on time of use, consumption, carbon emissions and a range of other factors; pay-as-you-go options so we can put an end to the penalty premium that hits the poorest, who use prepayment meters at present; better control of distributed energy generation and microgeneration; easier switching; and, of course, remote connection, disconnection and meter reading without the need for a field work force.
	However, the installation of smart meters is showing early signs of problems for consumers. Which?, Consumer Focus and the Office of Fair Trading are all picking up complaints, often about mis-selling, in an industry where consumer protection is still too weak and consumer trust in energy companies is at an all-time low. For instance, we are picking up reports of energy reps cold calling, with the customer believing that the purpose of the visit is to install a smart meter whereas the real purpose is to switch supplier; reports of customers being told that they qualify for a smart meter, as long as they switch supplier; and reports of reps offering free smart meters if people sign up to their energy supplier. The clear rules against any sales on installation visits,
	which the Minister published earlier this month as part of his update on the smart meter programme, should help, but they will help only if they are fully and toughly enforced.
	Like all other hon. Members, I received the Minister’s update letter, coincidentally dated today, on the smart meter programme. I thank him for it, but it has little or nothing to say about the areas of greatest concern. Let us call them the four Cs: cost; consumer confidence; controlled testing in trials and proper pilots; and the contract for the data and communications nerve centre.

Jim Dowd: I congratulate my right hon. Friend on raising such a significant issue. May I add a fifth C—competition—to the four that he has outlined? If the smart metering programme is implemented optimally, it stands a chance of bringing greater competition into an area beset by the big six cartel. Although there are huge dangers, as there have been with many public sector IT projects over the years, we should not lose sight of the fact that this is an opportunity to regain public confidence in the energy sector, which that cartel has seriously undermined in recent years.

John Healey: My hon. Friend is absolutely right: a perceived lack of proper competition is responsible for a large part of the loss of confidence among consumers. It is also responsible, in large part, for the frustration of many smaller suppliers, who feel closed out of what should be an open and competitive market. As he will see as I proceed, I pinpoint those doubts about proper competition in this sector as underpinning some of the difficulties that I anticipate this programme may have if the Government do not adjust their approach.
	Let me deal with my first C—cost—which is central to this matter. People have seen their energy bills go through the roof recently. Many people are struggling to pay, more report falling behind with their payments and some report being forced to choose between the very basics of eating and heating. They see energy companies making huge profits, little real competition to keep down prices, no help from the Government and no action from the regulator. The cost of the meters in total will be about £12 billion—at least on current estimates. That is more than £100 per smart electricity meter and more than £130 per smart gas meter. All costs are going directly on to the bills of consumers, yet there is no requirement to report these costs or show these costs in consumer bills; there is no guarantee that companies will pass the considerable savings on to the consumers in their bills; and, above all, there is no control over costs of installation, other than the Government’s assertion that market competition will do the job.
	The Minister will be well aware that the Public Accounts Committee shared some of those concerns in a report last year. The first conclusion of its report, “Preparations for the roll-out of smart meters,” is:
	“Consumers will have to pay energy suppliers for the costs of installing smart meters through their energy bills, but many of the benefits will pass in the first instance to the energy suppliers.”
	That paragraph concludes:
	“The Department is relying on competition to drive down prices, but Ofgem have clearly found that the energy market is not functioning effectively as a competitive market.”
	That was the point that my hon. Friend the Member for Lewisham West and Penge (Jim Dowd) made so clearly.
	At present, the Government are writing a blank cheque for the industry. The Government and Ofgem have some powers under the Energy Act 2011 to obtain information from suppliers on cost and performance, and as a start they should use them directly. The Minister also needs to rethink the membership of the panel he proposes to oversee the implementation of the smart meter programme. It is set out in one of the update papers he published earlier this month, the “Smart Energy Code”, which shows on page 73 that the governance panel to oversee the implementation consists of 13 full members with only up to two consumer representatives, no representatives from companies that specialise in metering and—potentially, as it says “possibly” in brackets—only one Government appointee, who will not have voting rights. The Minister should accept that if the programme is to be perceived as one that is directly tailored to maximise the benefits to consumers, the way he manages it and such arrangements must reflect that intent.
	Secondly, on consumer confidence, the net benefits of the programme are said to be on average about £25 a year for a household with both electricity and gas meters. The benefits, both environmental and financial, can only be fully realised if there is widespread take-up and if consumers use the information to reduce their consumption, to change tariffs and to switch suppliers if needed to get the best deal. Confidence, knowledge and trust in the smart meters are therefore essential, but they are also fragile. Fewer than one in four consumers—only 23%—consider energy suppliers to be trustworthy. Allowing them to run the roll-out without clear Government leadership risks damaging confidence in the overall purpose and benefits of smart meters. The Government’s hands-off policy therefore risks the very future of smart meters, and I think the collapse of consumer confidence and the failure of smart meters in other countries, such as Australia and the Netherlands, and in the state of California, are cautionary tales for us in the UK.
	My third C is controlled testing and pilots. As the Government are letting energy companies lead the installation of smart meters, activity is patchy. Some suppliers are holding back and one or two others, such as British Gas, are taking a market decision to move fast. British Gas has already installed 400,000 smart meters and tells me that only a quarter will need replacing in the light of the Government’s latest technical specifications and that its trials are producing valuable data and intelligence for the future. A more common view among consumer groups, energy supply companies and industry experts is that a greater grip is required from Government and that prior to the start of the planned roll-out from 2014, all aspects of the programme and its participants should be thoroughly tested. They believe that much greater direction and co-ordination is required by Government of the big energy companies to test different communications links, different ways of getting consumer confidence and the interoperability between suppliers and devices.
	In particular, I am concerned that the poorest will be put last. Smart meters should do away for good with higher charges for people who prepay for their energy, but none of British Gas’s 400,000 smart meters replaced prepayment meters and Government work on how
	prepayment will be built into the smart meter specs is being pushed back further into the future. It simply will not happen if each supplier is left to do its own thing, or to do nothing. It must be a higher priority for Ministers to sort out specifying what will be required for prepayment in all smart meters; trialling the installation and use of such meters; and establishing what help is needed for the most vulnerable. The digital switchover is a good example of both what can be done and the scale of what might be needed. I am told that in the Granada region, a team of 7,000 volunteers stood ready to step in to help consumers who were struggling to deal with switchover to make that change.
	The fourth C is the contract for the central data communications and data services company. This is required, of course, to link smart meters to suppliers. The PAC, again rightly, warns in the fifth conclusion of its report:
	“We expect the Department to take on board the lessons learned from other large Government IT programmes and to ensure that the contracts they place are sufficiently flexible to cater for smart grids and avoid additional costs falling to consumers.”
	In my view, the Government have the right approach: as long as levels of security and reliability are sensibly specified, as long as the system is kept as simple as possible, and as long as this is done and tested in good time for the national roll-out, so that the extra costs of modifying or upgrading meters are avoided, the single competitively appointed supplier for data and communications could make the market and the service more efficient. It is certainly better than allowing the 23 active energy suppliers simply to do their own thing.
	If that approach is right in principle and in practice for data communications, it is, however, reasonable to ask why a similar, tighter, Government-led approach is not right for meter installation as well. Which? is so concerned that it wants Ministers to call a halt to the current roll-out strategy, which is led by suppliers, to get proper trials under way, and then to restart the roll-out in 2014, so that it works for consumers, who in the end will pay for it.
	In conclusion, there are serious questions about how the Government are handling this huge national programme. I hope that Ministers will heed the warnings and adjust the Government’s approach, because this is an area where I and millions of hard-pressed consumers paying high electricity bills all want the Government to succeed.

Charles Hendry: As the right hon. Member for Wentworth and Dearne (John Healey) said, less than three weeks have elapsed since we published a number of smart metering consultations and decisions. The debate is therefore timely and I congratulate him on securing it and commend him for the measured way in which he introduced it, supporting the ambition but raising realistic, sensible and constructive questions about how it is being taken forward. I assure him that the Government are alive to the issues and that, for us, the interests of the consumer are at the heart of the programme. It is the consumer experience that will determine its success, and if consumers do not have the experience we want, it will not deliver and satisfy the ambition we all share.
	I agree with the right hon. Gentleman that the roll-out of smart meters will unlock huge benefits for consumers. We have brought forward the timetable because we think those benefits are so substantial. We want every home in Great Britain to have a smart meter and an in-home display by the end of 2019, enabling people to manage their energy consumption and reduce their carbon emissions.
	The roll-out will play an important role in Great Britain’s transition to a low-carbon economy and will help us to meet some of the long-term challenges that we face in ensuring an affordable, secure and sustainable energy supply. This is a huge and challenging project. It is one of the largest and most comprehensive smart metering projects in the world, and it is the largest change-over programme in the energy industry since the introduction of North sea gas about 40 years ago.
	The smart meter implementation programme must ensure that the roll-out is achieved in a cost-effective way, and the benefits to consumers and to industry need to be maximised. We have completed the first year of the foundation stage, which is critical preparation for the mass roll-out that will start in 2014. The publications on 5 April represent a key milestone in the implementation programme. They provide further detail on the technological and regulatory framework, and they set out substantial new proposals for engaging and protecting consumers throughout that period.
	Of course, there would be little point in such an undertaking without its bringing real and substantial benefits. Alongside our recent consultations, we have published updated economic impact assessments. These show a slight increase in the net benefits over the previous assessments, resulting in total net benefits of £7.2 billion over the next 20 years. For me, the consumer benefits will always be at the heart of the smart meter programme, so in my comments I shall focus on how we are working with industry and consumer groups to make sure that smart meter installation delivers all it promises for consumers.
	Most importantly, smart meters will give consumers near real-time information on their energy consumption to help them control their energy use, save money and reduce emissions, but as the right hon. Gentleman says, for smart meters to work effectively, the consumer needs to know how to work with them. Smart meters will bring an end to estimated billing, so no more surprises for consumers, and switching between suppliers will be smoother and faster. When consumers want to switch because they feel that the companies are not passing on the benefits that they expect from the smart meter programme, they will be in a stronger position to do so. We expect that new products will be supported by a more vibrant, more competitive and more efficient market in energy and energy management.
	We know that for consumers to realise all the benefits, an effective consumer engagement strategy will be needed—one that can ensure that consumers have confidence in the benefits and are reassured when they have concerns, and one that helps them to understand how to use their smart meters and better manage their consumption. More importantly, we need to recognise that some vulnerable consumers may struggle to access all the benefits of smart meters without additional help. In short, we need to place consumers’ interests at the heart of the roll-out, and on 5 April we announced a package of measures designed precisely to do that.
	Fundamental to consumers’ experience of smart metering will be the installation visit. That is why we are setting rules through a licence-backed code of practice to make sure that consumers have a good experience throughout the installation process, and that they are given the information they need to understand how to use their new meter and display, and how both can help them to use their energy more efficiently. We consulted last year on rules governing installation, and our recently published documents included our response to the consultation. They will place licence obligations on installing suppliers to offer customers an in-home display, allowing them to see what energy is being used and how much it is costing, as well as requiring suppliers to provide efficiency advice as part of the installation visit. Suppliers must also identify and meet the needs of vulnerable consumers, whether by arranging for a relative or carer to be present at the installation or by providing additional help in understanding and using the in-home display.
	We have also been clear that householders should not be subject to unwelcome sales or marketing in their own home, an experience that would be a huge turn-off for many and would risk putting vulnerable consumers under unacceptable pressure. The licence conditions for the code will therefore ban any sales during the installation visit, and they will require that suppliers must obtain consumers’ permission in advance of the installation visit if they are to talk to them about their own products. In all those areas we have been strongly guided by the interests and views of consumer groups.
	The code of practice will be developed by suppliers and approved by the regulator. It is right that suppliers should develop the code of practice because they know their customers, and they will be at the front end of installation, but if suppliers fail to submit an acceptable code, Ofgem will be able to direct changes or designate another code in its place. Ofgem will be able to take enforcement action if any supplier breaches the code.
	Efficient and customer-focused installations will be essential if we are to engage customers and help them to understand smart meters and the opportunities they bring. However, the Government, industry and others recognise that the action of individual suppliers on its own will not be enough. Building the confidence and trust of all consumers—an issue to which the right hon. Gentleman understandably referred—and reaching out to vulnerable or hard-to-reach consumers, needs consistent and co-ordinated communications. We know from research that third parties such as voluntary organisations, local authorities, and housing associations, as well as friends and family, can provide an effective and more credible source of information than either suppliers or central Government. We are therefore consulting on a consumer engagement strategy that would include a central delivery system delivered by suppliers, but with independent direction and external advisory input.
	Giving suppliers the responsibility to establish and fund a central body is right in the context of a supplier-led roll-out. It means they can establish arrangements that support their own engagement activities. It also means that efforts designed to raise awareness of and support for smart metering will sit alongside those tasks designed to encourage behaviour change. Of course, it will be important for a central body to reflect wider public
	policy and consumer interests. The consultation also therefore seeks views on the governance arrangements needed to ensure that a central body delivers the consumer engagement objectives, for example, by proposing an independent board and an advisory board with consumer expertise, and we will take into account the concerns that the right hon. Gentleman expressed on that board set-up.
	Consumer engagement also offers the possibility of synergies with other energy policies. Smart metering will support the green deal by encouraging choices that increase energy efficiency, and we are encouraging suppliers to bring together smart meter roll-out with the delivery of obligations such as the affordable warmth element of the energy company obligation. Bringing those together will provide not only efficiency savings but a more comprehensive package for vulnerable and low-income consumers. An essential part of the strategy will be continual monitoring of the delivery of smart meter consumer benefits from the foundation stage onwards. Ahead of the roll-out we will be looking at the results of suppliers' trials and of community-level engagement. Where benefits are not being delivered we will take further action.
	As the right hon. Gentleman has said, there is one group of customers who typically already engage with their energy consumption in a different way from most consumers, and those are the prepayment meter customers. As prepayment customers are often already more aware of their energy use and costs, our impact assessment forecasts a lower level of gas savings in particular from that sector. However, we believe that smart metering still has the potential to bring significant benefits to prepayment customers. Every smart meter will have the functionality to operate in either prepayment or credit mode, so the meters enable easy switching between the two payment methods as customers' circumstances change. Smart meters will allow more convenient ways of topping up payments, such as by phone, cash points or online, which should make prepayment appeal to a much wider group of customers. They will also enable periods to be set when disconnection will be prevented, for instance to stop customers from losing supply overnight or when shops are shut.
	Another important area of consumer protection addressed in our recent consultations is the need to protect the privacy of individuals and make sure they have control over the data recorded by the smart meter. The principle that has been absolutely critical to our thinking in this area from the start is that consumers must have a choice over who has access to their smart meter data, except where the data is needed to fulfil regulated duties. Suppliers need access to a certain amount of data for billing and to fulfil statutory requirements or licence obligations. For these purposes, we are proposing in our consultation that suppliers can have access to monthly data without consumer consent. If suppliers wish to access daily data, we propose that they may do so but that they will have to provide a clear opportunity for the consumer to opt out and that the data cannot be used for marketing without the customer's explicit consent. Beyond that, if suppliers wish to access half-hourly data—for instance, to develop more sophisticated services for consumers, such as the time-of-use tariffs to which the right hon. Gentleman referred—they must obtain explicit consent from the consumer to do so.
	It will not just be suppliers who will wish to access data from smart meters; a range of other parties, including individual consumers, network operators, energy service companies and online switching sites, might all have reasons for using data. Our principle—that consumers should have a choice about how their data are used and by whom—will also apply in this regard. Steps are being taken to ensure that consumers are able easily to access their own consumption data and share them with third parties, such as switching sites, should they wish to do so.
	We are also requiring that 13 months of data can be stored in the meter itself and that it is accessible to the consumer. That will ensure that the consumer has control over and can access their own data even if they have no wish to share it with other parties. Meanwhile, we have
	embedded security in the technical design of the meters to ensure that personal data are properly stored.
	I hope that I have been able to reassure the right hon. Gentleman about this massive and challenging project. We have come a long way and the publication of key consultations and conclusions earlier this month marked another milestone on the way to mass roll-out. I am grateful to him for securing the debate and hope that what I have been able to say shows that we are absolutely putting consumers’ interests at the heart of the roll-out, because for us that is integral to its success.
	Question put and agreed to.
	House adjourned.